MNI ASIA MARKETS ANALYSIS: 1% CPI, Mkt Sends 2Y Yield Over 3%

US TSYS: Hot CPI, 2Y Yld Over 3% First Time Since 2008

• Notably, 2Y yield surged to 3.0611% - the highest level since 2008, while curves bull flattened after some initial volatility in the long end: 2s10s at 9.858 (-12.786) vs. 9.421 low, 5s10s inverted, flattening -7.273 at -9.761 vs. -10.722 low, while 5s30s slipped to inverted low of -6.661.
• Reaction spurred several dealers to up their rate hikes estimates with Barclays now sees a 75bp Fed hike next week. They have also raised their forecast for the terminal rate by 25bp to 3.00-3.25% in early 2023, implying 150bp of hikes after June's meeting. That's the most aggressive June FOMC hiking call that we are aware of, but markets are pricing in a modest chance of such a surprise (15-20% probability per futures).
• GS upped they're hike forecast to 50bp in June, July and September (from 50bp in Jun/Jul and 25bp in Sep).

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00071 to 0.81929% (+0.00015/wk)
• 1M +0.02743 to 1.28214% (+0.16243/wk)
• 3M +0.02342 to 1.74471% (+0.11871/wk) * / **
• 6M +0.01728 to 2.31157% (+0.20228/wk)
• 12M +0.04686 to 3.00543% (+0.23000/wk)
• * Record Low 0.11413% on 9/12/21; ** New 2Y high: 1.72129% on 6/9/22

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.83% volume: $79B
• Daily Overnight Bank Funding Rate: 0.82% volume: $247B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.75%, $985B
• Broad General Collateral Rate (BGCR): 0.77%, $380B
• Tri-Party General Collateral Rate (TGCR): 0.77%, $360B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation, New Record High

NY Fed reverse repo usage climbs to new record high of 2,162.885B w/ 99 counterparties vs. Thursday's prior record of 2,142.318B.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Overall put trade two-way with better early selling on profit taking: -7,000 TYQ 117 puts, 115; -15,000 TYN 116/117 put spds, 21; -22,000 wk2 TY 117 puts, 2-4; and vol selling: -10,000 Dec 96.50 straddles, 57.0.
• Put buyers gradually returned as short end rates held near lows through the second half: +5,000 Mar 94.50/95.50 put spds, 14.5-15.0; +10,000 Jun 95.50/96.00 2x1 put spds, 1.5. In SOFR options: Block buy of 10,000 SFRZ2 95.87/96.12 put strip, 12.0 vs. 96.85/0.20%.
• One Tsy 5Y trade of note: -12,000 FVN 111/111.25, 4.5 ref 110-28.25 -- this after yesterday's +10,000 wk2 5Y 111/111.25 put spds at 1.5 vs. 111-24.5/0.05% -- anticipating today's hot CPI.

• Block, 5,850 SFRM2 98.25/98.37 put spds, 2.0
• Block, 10,000 SFRZ2 95.87/96.12 put strip, 12.0 vs. 96.85/0.20%
• 4,500 short Jun 96.37/96.50 put spds

• +5,000 Mar 94.50/95.50 put spds, 14.5-15.0
• +10,000 Jun 95.50/96.00 2x1 put spds, 1.5
• +20,000 Sep 96.50/96.62/96.87 put trees, 0.5 1-leg over ref 97.07-.075
• +10,000 Sep 96.62/97.00 2x1 put spds, 3.0-3.25
• Block, 6,000 Blue Sep 96.00/96.50 3x2 put spds, 13.5 ref 96.86
• -10,000 Dec 96.50 straddles, 57.0
• 2,000 Jul 97.12/97.25/97.37 put flys
• 5,000 Sep 97.12 puts, 8.0
• 5,000 short Sep 96.12/96.37 put spds
• 2,500 Dec 97.00/97.25/97.31 1x2x2 call trees

• Block, 10,000 FVN2 110.5 puts, 24.5
• +10,000 TYU 113.5/114.5 put spds, 15
• 12,400 TYN 114.5 puts, 9
• -12,000 FVN 111/111.25, 4.5 ref 110-28.25
• -7,000 TYQ 117 puts, 115
• -15,000 TYN 116/117 put spds, 21
• -22,000 wk2 TY 117 puts, 2-4
• 4,000 TYQ 120 calls, 19
• -10,000 TYN 117.5/119 put spds, 58
• 2,000 USQ 141 calls, 58
• 5,000 wk2 TY 117.25/117.75 put spds, 7
• Block, 10,000 TYN 117.75 puts, 38 ref 118-02
• 18,000 wk2 TY 118.25/118.75 call spds, 6 ref 117-28.5 to -30

EGBs-GILTS CASH CLOSE: US CPI Crushes European Front End

European short-end bonds sold off sharply Friday afternoon, on a higher-than-expected US CPI reading that boosted near-term global rate hike expectations.

• The UK and German curves bear flattened: markets are now pricing in 160bp in ECB hikes the rest of the year (+11bp on the session) and 179bp from the BoE (+10bp).
• UK 2Y yields now have a 2-handle for the first time since 2008, while Schatz neared 1%.
• Periphery spreads continued to sell off post-ECB, 10 BTP reaching a fresh post-May 2018 wide.

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

• Germany: The 2-Yr yield is up 13.6bps at 0.971%, 5-Yr is up 13.4bps at 1.329%, 10-Yr is up 8.6bps at 1.516%, and 30-Yr is up 3.3bps at 1.659%.
• UK: The 2-Yr yield is up 19.1bps at 2.046%, 5-Yr is up 18.1bps at 2.144%, 10-Yr is up 12.4bps at 2.447%, and 30-Yr is up 7.9bps at 2.57%.
• Italian BTP spread up 7.4bps at 224.7bps / Greek up 18.8bps at 288.1bps

EGB Options: More ECB Hiking Plays To Close Out The Week

Friday's Europe rates/bond options flow included:

• OEN2 123p sold in 31.25k
• OEQ 121/125 RR, bought the put in 25k; Net received 44.5 ticks
• ERU2 99.37p, bought for 6.75 in 3k (ref 99.45)
• ERU2 99.50/99.37/99.25p ladder, bought for 2.5 in 4k
• ERU2 99.62/99.87cs vs 99.25p, bought the cs for -0.75 (receive) in 2k
• ERU2 99.25p, sold at 2.75 in 5k
• ERZ2 99.25/99.50cs 1x2, sold at 1.5 in 4k
• ERZ2 98.625/98.875^^, bought for 32.25 in 4k
• ERH3 98.00/97.50ps 1x2, bought for 3.25 in 1.5k

FOREX: US Dollar Is King Amid Surging Yields Post Above-Estimate CPI

• Following the above estimate US CPI data, the greenback has extended its weekly gains with the USD index looking set to post +2% gains since last Friday’s close.
• Two- and five-year US Treasury yields climbed to the highest since 2008 with swaps now pricing at least 50bps hikes for the next three Fed meetings and showing greater than 50% odds of a 75bps increase in July.
• EURUSD continued its downward trajectory following Thursday’s ECB meeting. The move lower also means channel resistance at 1.0733 remains intact. For bears, the extension lower has seen a breach of 1.0533, the May 20 low, opening up 1.0461 (previous lows) and 1.0350, low May 13 and bear trigger.
• The weakness across major equity benchmarks naturally weighed on the likes of AUD, NZD, CAD and CHF, however GBP was the main G10 victim of the price action on Friday.
• GBPUSD sold off close to 1.5% following a clean break of the key short-term support point at 1.2431, Tuesday’s low. The primary trend direction remains down and today’s resumption of bearish activity has breached initial support at 1.2317, the May 17 low. The key technical bear trigger resides at 1.2156, May 13 low.
• Similarly, global stagflationary concerns weighed substantially on the emerging market FX basket. In particular, the South African Rand dropped 2.25% and was closely followed by the majority of LatAm currencies. USDMXN rose back above the 50-day EMA at 19.9702, a technically bullish development.
• UK growth data headlines a quiet start to next week. Central banks remain in focus with the Fed, SNB and BOE all meeting next week.

FX: Expiries for Jun13 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0575(E651mln), $1.0625-35(E567mln), $1.0675(E630mln), $1.0745-50(E1.9bln)
• EUR/JPY: Y143.00(E1.6bln)
• USD/CNY: Cny6.85(2.2bln)

Late Equity Roundup, Off Midday Lows

Stocks broadly weaker after the FI close are off midday lows, late position squaring profit taking in rates and stocks. Heavy FI short end selling (2YY topped 3% to 3.0528% a 14Y high) after establishing session lows by midmorning following CPI inflation 1.0% jump in May after rising 0.3% in April. Barclays calling for surprise 75bp hike from Fed next week.

• SPX eminis fell below 3900.0 briefly to 3899.5 low, with attn on key support of 3872.00/3807.50 (Low May 24 / Low May 20 and bear trigger). after the bell, ESM2 trades -90 (-2.24%) at 3925.75.
• SPX leading/lagging sectors: Consumer Staples (+0.05%) with food, beverage and tobacco outperforming, followed by Utilities (-0.36%) and Energy (-1.10) a distant third. Laggers: Consumer Discretionary (-3.80%) with retailing, autos and consumer services equally weighing on the sector. Information Technology (-3.27%) and Financials followed (-3.09%), banks weighing heavily on the latter.
• DJIA -662.4 (-2.05%) at 31607.89; Nasdaq -347.7 (-3%) at 11405.04.
• Dow Industrials Leaders/Laggers: Walmart (WMT) continued to gain in late trade, +1.43 at 122.44, followed by Verizon (VZ) +0.31 at 51.25. Laggers: weaker but off midday lows: Goldman Sachs (GS) -15.06 at 289.16, Microsoft (MSFT) -9.20 at 255.59 and Home Depot (HD) -8.64 at 291.22.

E-MINI S&P (M2): Fails To Breach The 50-Day EMA

• 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: 4169.30/4202.25 50-day EMA / High May 31
• PRICE: 3943.00 @ 14:23 BST June 10
• SUP 1: 3872.00/3807.50 Low May 24 / Low May 20 and bear trigger
• 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 have failed to overcome resistance at the 50-day EMA - the average intersects at 4169.30. Futures are weak again today, extending the latest reversal lower. A deeper pullback would pave the way for weakness towards the key support and bear trigger at 3807.50, the May 20 low. A breach of this level would resume the downtrend. Key short-term resistance, just above the 50-day EMA, is at 4202.25, May 31 high.

COMMODITIES: Souring Risk Sentiment Drives Oil And Gold After A Mixed Week

• Crude oil prices have slipped today as risk sentiment soured with strong US CPI inflation and surging yields, leaving prices 1.5-2% higher over a mixed week that has seen narrower price action but continues the theme of tight supply concerns.
• WTI is -0.8% at $120.55 (+1.4% on the week) having earlier got close to touching Wednesday’s high of $123.18. That remains initial resistance whilst support is eyed at $117.14 (Jun 7 low).
• Highlighting the mixed price action, today’s most active strikes in the CLN2 have been $125/bbl calls followed by $110/bbl puts and $115/bbl puts.
• Brent is -0.95% at $121.93 (+1.8% on the week) having stopped just shy of to touching Wednesday’s high of $124.40 with the bull trigger from Mar 7 high of $124.42 just above that.
• Gold has ultimately jumped +1.4% to $1874.48 today for +1.3% on the week. It first fell with higher yields and dollar strength post-CPI before growth concerns mounted with a catalyst being very weak U.Mich consumer sentiment, supporting the yellow metal with haven demand.
• Having been largely rangebound this week, it clears the 50-day EMA of $1871.7 and tests resistance at $1874.1 (May 24 high), after which it could open $1909.8 (May 5 high).

Monday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
13/06/2022	0600/0700	**		UK	Index of Services
13/06/2022	0600/0700	**		UK	UK Monthly GDP
13/06/2022	0600/0700	***		UK	Index of Production
13/06/2022	0600/0700	**		UK	Output in the Construction Industry
13/06/2022	0600/0700	**		UK	Trade Balance
13/06/2022	0600/0800	**		NO	Norway GDP
13/06/2022	1100/1300			EU	ECB de Guindos at Arab Central Banks & Monetary Authorities' Meeting
13/06/2022	1230/0830	*		CA	Household debt-to-disposable income
13/06/2022	1500/1100	**		US	NY Fed survey of consumer expectations
13/06/2022	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
13/06/2022	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill