MNI ASIA MARKETS ANALYSIS: Carry-Over Bid For Stocks

US TSYS: 30YY Comfortably Over 3% Again

• Rates extended lows prior to positive but not market moving April Chicago Fed National Activity Index 0.47 vs. 0.50 est (March down-revision to 0.36 from 0.44).
• Otherwise, no obvious headline driver or block print to explain the initial move save carry-over risk-on tone with banks leading the rally in stock indexes: (JPM and Citi +7.12%, Bank of America +6.38%).
• Nothing new from Atlanta Fed Bostic as he commented on economic outlook: COMFORTABLE WITH 50 BPS HIKES NEXT COUPLE OF MEETINGS .. OPEN TO MOVING MORE AGGRESSIVELY IF INFLATION HIGHER, Bbg
• Tuesday focus:
• S&P Global US Mfg PMI (59.2, 57.7), Services PMI (55.6, 55.2) and Composite PMI (56.0, 55.7) at 0945ET; May-24 1000 Richmond Fed Mfg Index (14, 10) and New Home Sales (763k, 750k); MoM (-8.6%, -1.7%) at 1000ET.
• Fed Chair Powell recorded open remarks eco-summit, text, no Q&A at 1220ET
• US Tsy $47B 2Y note auction (91282CER8) at 1300ET

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00157 to 0.82314% (-0.00100 total last wk)
• 1M +0.03214 to 1.00571% (+0.08686 total last wk)
• 3M +0.01743 to 1.52386% (+0.06272 total last wk) * / **
• 6M -0.00371 to 2.06186% (+0.07057 total last wk)
• 12M -0.01200 to 2.71800% (+0.07786 total last wk)
• * Record Low 0.11413% on 9/12/21; ** New 2Y high: 1.52386% on 5/23/22

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.83% volume: $82B
• Daily Overnight Bank Funding Rate: 0.82% volume: $261B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.78%, $943B
• Broad General Collateral Rate (BGCR): 0.79%, $362B
• Tri-Party General Collateral Rate (TGCR): 0.79%, $346B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation, Fifth Consecutive New High

NY Fed reverse repo usage climbs to new all-time high of 2,044.658B w/ 94 counterparties vs. last Friday's record $1,987.987B.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Block, 2,500 SFRM2 98.25/98.37/98.43/98.62 iron condors, 1.75 ref 98.4025
• +12,000 SFRU2 97.37/97.43/97.56/97.62 call condors, 2.0-1.75, mostly 1.75
• Blocks, 10,000 SFRU2 97.43/97.56/97.68 put flys, 2.25, another 7k at 2.0/screen
• 4,000 SFRZ2 97.25/97.37/97.50 put flys

• +2,500 Jun 98.31 calls, 1
• Block, 5,000 short Jul 96.25/96.62 put spds, 10.0 vs. 96.785/0.20%
• 10,000 short Jun 96.50 puts
• +5,000 short Jun 96.50/96.62 2x1 put spds, 1.5 vs. 96.685/0.33%
• Blocks, total 26,580 Sep 97.62 calls, 10.0 vs. 97.38/0.33%

• Block, 19,500 TYN 120.5/122 call spds, 20 ref 119-09
• +10,000 TYN 121 calls, 22 re. 119-04.5
• 3,300 TYN 121.5 calls, 21 ref 119-18.5
• +2,000 TYU 122/123 call spds, 15 vs. 120-01/0.07%
• +10,000 FVN 114 calls, 14.5 ref 112-27.25

EGBs-GILTS CASH CLOSE: Lagarde Sets The Path To September

European yields rose Monday, with Gilts outperforming Bunds (reversing morning underperformance vs Germany in the afternoon as equity gains accelerated).

• ECB President Lagarde set a hawkish tone for the session with her unusually explicit forward guidance in a morning blog post. She confirmed that a July hike was on the cards, with rates exiting negative territory by end-Q3.
• A BBG sources piece in the afternoon said some officials were dismayed by the effective ruling out of a 50bp hike option for now; little market reaction.
• BTP spreads tightened, having initially reacted negatively to Lagarde's comments.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 7.9bps at 0.421%, 5-Yr is up 8.3bps at 0.738%, 10-Yr is up 7.3bps at 1.017%, and 30-Yr is up 8.2bps at 1.198%.
• UK: The 2-Yr yield is up 6.5bps at 1.572%, 5-Yr is up 6.6bps at 1.669%, 10-Yr is up 7.7bps at 1.97%, and 30-Yr is up 5.5bps at 2.185%.
• Italian BTP spread down 4bps at 201.7bps / Greek down 5.4bps at 272.4bps

EGB Options: Mixed Trade

Monday's Europe rates/bond options flow included:

• DUN2 109.50/109.20 ps for 10/10.25 in 3k
• ERU2 99.87^ v 99.75p, bought the straddle up to 13 in 4.1k
• ERU2 99.75/100.00/100.25 c fly 1x2x0.5, sold at 3.25 in 19k

FOREX: Greenback Under Pressure As EURUSD Breaks Resistance

• The US Dollar has been on the backfoot from the open and the USD index is around 1% lower on Monday. US yields are higher on the day, however, markets continue to consider the lowering yield differentials last week that has halted the greenback rally for now.
• Adding to the USD pressure, the early mover in FX was in late Asia trade, with USDCNY and USDCNH falling close to 3 big figures, after Biden said that Chinese tariffs imposed by the Trump administration were under consideration.
• Furthermore, comments from ECB President Lagarde via a blog post provoked some very supportive price action for the single currency. Lagarde stated “we are likely to be in a position to exit negative interest rates by the end of the third quarter.” The comments have prompted some sell-side analysts to indicate the next steps for the ECB have been ‘rubber stamped’ with likely 25bp hikes in both July and September.
• Following EURUSD clearing the 20-day EMA at 1.0570 overnight, technical conditions had suggested scope for a stronger short-term recovery which has manifested following a print above key resistance at 1.0642, the May 5 high.
• The current bull cycle started at 1.0350, May 13 low and from the base of a bear channel, drawn from the Feb 10 high. The channel top intersects at 1.0857 and is a potential short-term objective. Initial support is at 1.0533, May 20 low.
• In similar vein, the next upside target for Cable is at 1.2600, followed by 1.2638 High May 4 and a key resistance.
• Focus in the euro area tomorrow remains on economic sentiment surveys with the key preliminary PMIs for May due. Highlights for the week remain Wednesday’s RNBZ meeting/decision as well as the release of the FOMC minutes.

Late Equity Roundup: Banks, Energy Equipment/Services Plow Higher

Stocks firmer near the top session highs after the FI close, banks leading financial shares as major indexes continue to bounce off last Fri's Mar'21 lows.

• SPX emini futures currently +65.75 (1.69%) at 3964.75, Dow Industrials +601.3 (1.92%) at 31859.36, Nasdaq +147.4 (1.3%) at 11500.64.
• SPX leading/lagging sectors: Financials sector outperforms (+3.72%) w/banks gaining (JPM and Citi +7.12%, Bank of America +6.38%). Energy (+2.88%) lead by energy equipment and services, Consumer Staples (+2.21%).
  
• Laggers: Off lows, Consumer Discretionary continue to lag (+0.52%) w/ auto shares outperforming retailers; Health Care sector (0.81%) followed by Real Estate (+0.18%).
• Dow Industrials Leaders/Laggers: As noted banks outperforming: Goldman Sachs (GS) +12.27 at 319.07, JPM +8.26 at 125.65. United Health Care gaining UNH) +7.13 at 492.86.
• Laggers: Home Depot (HD) -1.35 at 285.84, followed by Dow Inc (DOW) -0.92 at 67.19, Salesforce (CRM) -0.31 at 159.34.

E-MINI S&P (M2): Trend Needle Still Points South

• RES 4: 4509.00 High Apr 21
• RES 3: 4393.25 High Apr 22
• RES 2: 4303.50 High Apr 26/28 and a key short-term resistance
• RES 1: 4099.00/4227.44 High May 9 / 50-day EMA
• PRICE: 3936.50 @ 14:16 BST May 23
• SUP 1: 3807.50 Low May 20
• SUP 2: 3801.97 38.2% of the Mar ‘20 - Jan ‘22 bull leg (cont)
• SUP 3: 3787.74 2.618 proj of the Mar 29 - Apr 18 - 21 price swing
• SUP 4: 3747.52 2.764 proj of the Mar 29 - Apr 18 - 21 price swing

S&P E-Minis remain vulnerable following the reversal from last Wednesday’s high of 4095.00. This left the initial key resistance - 4099.00, May 9 high - intact. The reversal lower, and Friday’s fresh trend low, signals a resumption of the downtrend and opens 3801.97, 38.2% of the Mar ‘20 - Jan ‘22 bull leg (cont). Clearance of 4099.00 is required to ease the bearish threat and signal a potential short-term reversal.

COMMODITIES: Oil Mixed Whilst European Gas Touches Three-Month Low

• A mixed session for crude oil, steadily firming overnight, sliding in the US morning before a partial bounce on German hopes that the EU Russian oil embargo can be agreed within days, although countered by Hungary signalling talks may go into June.
• Larger price rises are seen further out the forwards curve, presumably on the assumption of incoming tighter supply.
• WTI is unch at $110.31. It hasn’t troubled resistance at $113.20 (May 17 high) or support at $103.24 (May 19 low).
• Brent is +0.6% at $113.27. It hasn’t troubled resistance at $115.69 (May 17 high) or support at $105.70 (May 13 low).
• Gold is +0.5% at $1856.44 as it’s buoyed by a further slide in the US dollar. Touching an intraday high of $1856.15, it moved nearer to resistance at the 50-day EMA whilst support remains far below at $1807.5 (May 18 low).
• Separately, European natural gas prices fell to a three-month (pre-Ukraine war) low as storage recovered, with the Dutch front-month contract settling -5.3% on the day.

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
23/05/2022	2330/1930			US	Kansas City Fed's Esther George
24/05/2022	0030/0930	**		JP	IHS Markit Flash Japan PMI
24/05/2022	0600/0700	***		UK	Public Sector Finances
24/05/2022	0645/0845	**		FR	Manufacturing Sentiment
24/05/2022	0715/0915	**		FR	IHS Markit Services PMI (p)
24/05/2022	0715/0915	**		FR	IHS Markit Manufacturing PMI (p)
24/05/2022	0730/0930	**		DE	IHS Markit Services PMI (p)
24/05/2022	0730/0930	**		DE	IHS Markit Manufacturing PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Services PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Manufacturing PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Composite PMI (p)
24/05/2022	0830/0930	***		UK	IHS Markit Manufacturing PMI (flash)
24/05/2022	0830/0930	***		UK	IHS Markit Services PMI (flash)
24/05/2022	0830/0930	***		UK	IHS Markit Composite PMI (flash)
24/05/2022	0900/1000	*		UK	Index Linked Gilt Outright Auction Result
24/05/2022	1000/1100	**		UK	CBI Distributive Trades
24/05/2022	-			EU	ECB de Guindos at ECOFIN Meeting
24/05/2022	1230/0830	**		US	Philadelphia Fed Nonmanufacturing Index
24/05/2022	1255/0855	**		US	Redbook Retail Sales Index
24/05/2022	1345/0945	***		US	IHS Markit Manufacturing Index (flash)
24/05/2022	1345/0945	***		US	IHS Markit Services Index (flash)
24/05/2022	1400/1000	***		US	New Home Sales
24/05/2022	1400/1000	**		US	Richmond Fed Survey
24/05/2022	1620/1220			US	Fed Chair Jerome Powell
24/05/2022	1700/1300	*		US	US Treasury Auction Result for 2 Year Note
24/05/2022	1715/1815			UK	BOE Tenreyro Panels Discussion
24/05/2022	1800/2000			EU	ECB Lagarde Opens World Economic Forum Dinner