MNI ASIA MARKETS ANALYSIS: Pricing In Hawkish Fed Rhetoric

30YY Taps 2.9268, May 2019 Level

FI markets trading broadly weaker after the early closing bell (Globex closes normal time at 1700ET), near late lows as 30YY hits 2.9268 high -- last seen May 2019.

• Little delay in post-US data selling into bid that developed after steady ECB policy annc. Retail Sales in-line w/ estimates (+0.5%), weekly claims slightly higher (+185k) continuing claims lower (1.475M) while Import/Export prices stronger than expected in all areas.
• Eurodollar futures under heavy pressure as 50bp rate hike chance on the rise again after NY Fed Williams sees 50bp hike in May as a "very reasonable option" in the Fed's effort to "get inflation back to 2%." while they can debate MBS sales further down the road."
• No obvious headline or technical drivers in late morning trade to explain the move, some desks noting carry-over selling in 5s-10s on post-ECB sell positioning.
• After bear flattening in first half, yield curves looking mixed after the bell, off lows: 2s10s at 37.355 (+2.909) vs. 28.308 low; 5s30s at 4.177 (-.0151) vs. 2.136 low.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00500 at 0.32229% (-0.00529/wk)
• 1 Month +0.04029 to 0.59433% (+0.08043/wk)
• 3 Month +0.01842 to 1.06271% (+0.05200/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.00514 to 1.55671% (+0.01628/wk)
• 1 Year -0.02986 to 2.22157% (-0.05000/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.33% volume: $77B
• Daily Overnight Bank Funding Rate: 0.32% volume: $244B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.29%, $874B
• Broad General Collateral Rate (BGCR): 0.30%, $336B
• Tri-Party General Collateral Rate (TGCR): 0.30%, $330B
• (rate, volume levels reflect prior session)

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Eurodollar traders noted a sale of 8,000 short Jun 96.18/96.62 put spds, 10 vs. 96.81/0.25% after buying noted in July Jul 97.37/97.50/97.75 put trees overnight.
• Highlight Treasury option trade was a sale of 15,000 FVM 111.75/112/112.75/113 put condors on screen at 2.5 after paper sold 17,000 TYM 119.5 puts at 59 ref 120-02.5 -02.

+5,000 short Sep 96.00/97.37 put over risk reversals, 0.5 vs. 96.71/0.42%
-8,000 short Jun 96.18/96.62 put spds, 10 vs. 96.81/0.25%
Overnight trade
3,000 Jul 97.37/97.50/97.75 put trees

• -15,000 FVM 111.75/112/112.75/113 put condors, 2.5
• -17,000 TYM 119.5 puts, 59
• Overnight trade
• 11,000 FVM 115 calls, 20-22
• 7,800 TYM 118 puts, 16
• 1,500 USK 140 puts, 16
• 2,500 FVM2 112.5/113 put spds

EGBs-GILTS CASH CLOSE: Curves Steepen Post-ECB

Yields finished higher Thursday following the ECB decision, ahead of European markets closure for a long weekend.

• The ECB decision didn't really change the status quo (emphasising a "flexible" approach to removing accommodation), and Bunds initially strengthened as it wasn't as hawkish as some had feared.
• But long-end yields started rising quickly in the closing minutes of Lagarde's press conference, largely tracking USTs. Short-end yields remained subdued.
• A couple of BBG/RTRS sources pieces signalling a Q3/July 25bp rate hike was still possible boosted 2Y Bund yields, but they remained lower on the day.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.7bps at 0.047%, 5-Yr is up 2.5bps at 0.574%, 10-Yr is up 7.6bps at 0.842%, and 30-Yr is up 11.4bps at 1.015%.
• UK: The 2-Yr yield is up 7.1bps at 1.56%, 5-Yr is up 7.5bps at 1.624%, 10-Yr is up 9bps at 1.889%, and 30-Yr is up 10.5bps at 2.051%.
• Italian BTP spread up 3.3bps at 164bps / Spanish up 0.2bps at 93.8bps

EGB Options: Pre-Holiday Flies And Spreads

Thursday's Europe rates / bond options flow included:

• OEK2 127.5/126.5ps, bought for 15 in 2k
• RXK2 150p, bought for 3 in 1k
• RXK2 158.50/160.50cs 1x2, bought for 6.5 in 5k
• RXK2 153/151.5 ps1x1.5 bought for 10 in 4k
• RXM2 150/145 ps 1x2, bought for 19 in 1,635
• ERZ2 99.75/99.875/100.00c fly, bought for 1.75 in 2.5k
• ERZ2 99.25/98.75ps 1x1.75, bought for 5 in 10k

FOREX: Euro Plummets As ECB Bides Their Time, DXY Soars

• With no change in ECB policy rates nor the APP purchases schedule, markets were underwhelmed by the governing council’s commitment to optionality, gradualism and flexibility. As such, the Euro came under heavy pressure following both the statement release and price action extended throughout Lagarde’s press conference.
• This translated into EURUSD giving back the entirety of Wednesday’s advance and breaching the key 1.0806/09 support area and bear trigger for the pair. Additional headwinds arising from higher US yields and a firmer dollar index prompted the pair to make fresh 23-month lows at 1.0758.
• After the dust had settled the euro caught a late bid on an ECB sources story suggesting the governing council could still raise its interest rates in July, but policymakers agreed at a meeting on Thursday to keep their options open. EURUSD found relief from around 1.0775 to 1.0815 on the comments and is roughly where we reside approaching the long Easter weekend.
• As mentioned, the greenback performed well on Thursday overall, evident by the DXY (+0.65%) firming to fresh cycle highs at 100.76. This led the majority of the G10 complex lower with AUD, CAD, GBP all falling around half a percent but CHF the notable laggard, retreating 0.8%.
• Similarly, the firmer dollar and higher US yields weighed on the emerging market basket with the JPMorgan EM CCY Index falling 0.5%, led by MXN losses of around 1.00%.
• Despite widespread market closures tomorrow, US Empire State Manufacturing Index data is on the schedule. Focus then turns to Chinese growth data out early on Monday before another set of European holidays may keep impact overall market liquidity.

FX: Expiries for Apr15 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0810-25(E790mln), $1.0875-85(E785mln)

EQUITIES: Late Equity Roundup, Near Lows, DJIA Outperforming

The latest earnings cycle started in earnest Thursday -- several bank names included, (USB, WFC, MS, GS and C) all beating estimates. Nevertheless, stocks trade weaker, near lows with Dow Industrials outperforming after the early FI market close. Some desks cited the rebound in Tsy yields (30YY taps 2.8975%) and curves bouncing off flatter levels for sell trigger.

• SPX extended lows in late trade: ESM2 at 4403.5 (-38.75), focus on key support of 4362.63, 50.0% retracement of the Feb 24 - Mar 29 rally.
• SPX leading/lagging sectors: Energy sector gained late (+0.62%), outpacing Utilities (+0.33%) and Consumer Staples (+0.31%). Strong airline performance helped buoy industrials earlier while sector receded late (+0.09%).
• Laggers: Information Technology sector (-1.65%) as supply chain woes for chips weighing on semiconductor and hardware makers.
• Meanwhile, Dow Industrials currently trade -4.64 (-0.01%) at 34562.98, Nasdaq -219.9 (-1.6%) at 13424.34.

• RES 4: 4730.50 High Jan 1
• RES 3: 4663.50 High Jan 18
• RES 2: 4631.00 High Mar 29 and a key resistance
• RES 1: 4519.75/4588.75 High Apr 8 / High Apr 5
• PRICE: 4430.00 @ 14:56 BST Apr 14
• SUP 1: 4362.63 50.0% retracement of the Feb 24 - Mar 29 rally
• SUP 2: 4499.29 61.8% retracement of the Feb 24 - Mar 29 rally
• SUP 3: 4239.00 Low Mar 16
• SUP 4: 4220.92 76.4% retracement of the Feb 24 - Mar 29 rally

The S&P E-Minis short-term condition remains bearish and near-term gains are considered corrective. The contract has this week traded below the 50-day EMA, which intersects at 4451.78 today, and this has reinforced a bearish threat. The move below 4400.00 signals scope for weakness towards 4362.63 next, a Fibonacci retracement. Initial firm resistance has been established at 4519.75, Apr 8 high A break would ease the bearish threat.

COMMODITIES: WTI Nears Key Short-Term Resistance On EU Russia Ban Draft

• Oil prices have edged higher on the day with the EU starting to draft a ban on Russian oil imports, after what had been a tepid day of slowing moving lower.
• The pop higher comes despite major oil traders already moving towards essentially self-sanctioning from May 15 according to a Reuters story yesterday.
• WTI is +1.0% at $105.25, close to the key near-term resistance of $105.59 (Apr 5 high), clearance of which could open $108.75 (Mar 30 high).
• Brent is +1.1% at $109.91, testing the Apr 5 high of $109.90 after which it opens $112.28.
• Gold is -0.25% at $1972.8 having tried unsuccessfully to clear yesterday’s high of $1981.6, in part being kept in check by the move higher in US rate expectations and the subsequent sell-off in Tsys. Support is seen at the 20-day EMA of $1942.6.

Friday-Monday Economic Calendar

The only data to speak of for Monday is NAHB Housing Market Index at 1000ET

Date	GMT/Local	Impact	Flag	Country	Event
15/04/2022	0645/0845	***		FR	HICP (f)
15/04/2022	0800/1000			EU	ECB Professional Forecasters Survey
15/04/2022	0800/1000	**		IT	Italy Final HICP
15/04/2022	1230/0830	**		US	Empire State Manufacturing Survey
15/04/2022	1315/0915	***		US	Industrial Production
15/04/2022	2000/1600	**		US	TICS