MNI ASIA MARKETS ANALYSIS: Fed Credibility on the Line

US TSYS: Market Roundup: StL Fed Bullard in Barcelona

• No economic data or significant headline risk as cash rates and stock exchanges closed in observance of Juneteenth holiday.
• StL Fed Pres Bullard is discussing interest rates and inflation to the AXA-Barcelona School of Economics at the moment, Q&A forthcoming. "Inflation in the U.S. is far above target and is at levels last seen in the 1970s and early 1980s. This situation is risking the Fed’s credibility with respect to its inflation target," Bullard said, adding "U.S. inflation expectations could become unmoored without credible Fed action."
• US 30Y Bond futures have inched off midday lows, USU2 -18 at 134-03.
• Otherwise, no obvious headline driver weighing on rates, hard to call the move risk-on though SPX emini equity futures holding near session highs, ESU2 +40.0 3715.75.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N no settle, finished 1.56743% last Friday (+0.74814 total last wk)
• 1M +0.01400 to 1.62629% (+0.33015 total last wk)
• 3M +0.02757 to 2.12343% (+0.35115 total last wk) * / **
• 6M +0.03243 to 2.81286% (+0.46886 total last wk)
• 12M +0.03471 to 3.62057% (+0.58043 total last wk)
• * Record Low 0.11413% on 9/12/21; ** New 2+Y high: 2.09586% on 6/17/22

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

Limited volumes w/ abbreviated futures session in observance of Juneteenth holiday. What little trade there is, relegated to July position squaring ahead Fri expiration:

• -5,800 TYN 117/117.5 call spds, 5 ref 116-02
• 2,000 TYN 117/117.25/117.75 broken call trees earlier, as well as
• 4,500 TYN 115.75 puts vs. 116.25/117 call spds

EGBs-GILTS CASH CLOSE: 2Y Gilt Yields At Post-2008 Highs

Gilts underperformed Bunds Monday in a relatively light trading session (US markets observing a holiday) punctuated by central bank speakers.

• BoE's Mann told an MNI Connect event that she voted for a 50bp hike at the last meeting in part to avert further currency weakness further boosting imported inflation.
• 2Y Gilt yields hit post-2008 highs.
• ECB's Lagarde highlighted that wages were beginning to rise.
• OAT spreads widened following President Macron's failure to secure a parliamentary majority in Sunday's elections, though remain off June's highs.

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

• Germany: The 2-Yr yield is up 5.9bps at 1.153%, 5-Yr is up 9.3bps at 1.55%, 10-Yr is up 8.8bps at 1.749%, and 30-Yr is up 9bps at 1.941%.
• UK: The 2-Yr yield is up 9.6bps at 2.3%, 5-Yr is up 10.2bps at 2.309%, 10-Yr is up 10.6bps at 2.604%, and 30-Yr is up 12.9bps at 2.796%.
• Italian BTP spread up 1.8bps at 195.5bps / Greek down 9.8bps at 227.2bps

EGB Options: Bund Call Fly Selling And Buying; Sonia Upside Plays

Monday's Europe rates / bond options flow included:

• DUU2 108/107.40ps 1x1.5 sold at 3.5 in 1.5k
• RXQ2 148/150/154c fly sold at 1.5 down to 0.5 in 1k
• RXU2 148.00/152.00/156.00 call fly bought for 59 in 10k
• OEQ2 120.00p, bought for 63 in ~3.2k
• SFIQ2 97.80/97.90cs, bought for 2.75 in 5k
• SFIZ2 97.50/98.00 cs 1x1.5 vs 96.00p x0.5, bought the cs for 1 in 2k (2k x1k)

FOREX: US Holiday Prompts Narrow FX Ranges, DXY Marginally Lower

• The greenback tracked marginally lower during the APAC session on Monday and has maintained the slightly softer price action to start the week. The USD index remains around -0.25% below NY closing levels from last Friday, residing around 104.40.
• Firmer equity futures are appearing the main catalyst for this dip, boosting the likes of AUD, NZD and CAD which look set to post +0.3% gains for the session.
• Strong leads from China stocks regionally bolstered the Chinese Yuan, which also outperforms to start the week.
• As expected, global markets have remained very quiet amid the US market closures and FX ranges throughout NY trade have echoed this narrative. EURUSD and USDJPY remain very close to unchanged with the latter’s trend conditions remaining bullish.
  • The rebound from Thursday’s low suggests a recent USDJPY correction is over. The recent print above 135.00 maintains the positive price sequence of higher highs and higher lows. The focus is on a climb towards 136.04, a Fibonacci projection. Initial firm support is seen at Thursday’s low of 131.50, just below the 20-day EMA.
• Looking ahead, RBA Governor Lowe is due to speak about the economic outlook and monetary policy at an event co-hosted by the American Chamber of Commerce and Australia and New Zealand Banking Group, in Sydney. Q&A expected.
• Following this event, the RBA minutes from the June meeting are due for release.

FX Expiries for Jun21 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0470-80(E824mln), $1.0575-85(E990mln)
• USD/JPY: Y134.00($1.4bln), Y134.35-50($785mln)
• GBP/USD: $1.2100(Gbp505mln)
• AUD/USD: $0.7000-15(A$1.9bln)
• NZD/USD: $0.6300(N$998mln)
• USD/CNY: Cny6.80($990mln)

EQUITIES

S&P E-Mini Future up 40.25 points (1.1%) at 3716. S&P E-Minis remain vulnerable and the trend direction is down. Last week’s fresh cycle lows and breach of support at 3810.00, May 20 low, reinforces the current bearish theme. The focus is on 3600.00 next

COMMODITIES

• WTI Crude Oil (front-month) up $0.61 (0.56%) at $110.17
• Gold is down $3.17 (-0.17%) at $1836.24

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
21/06/2022	2301/0001	*		UK	XpertHR pay deals for whole economy
21/06/2022	0130/1130			AU	RBA Minutes June Meeting
21/06/2022	0715/0815			UK	BOE Pill at Institute of Accountants Economic Summit
21/06/2022	0800/1000	**		EU	EZ Current Acc
21/06/2022	1000/1100	**		UK	CBI Industrial Trends
21/06/2022	1215/1315			UK	BOE Tenreyro Seminar at Goethe University
21/06/2022	1230/0830	**		CA	Retail Trade
21/06/2022	1230/0830	**		US	Philadelphia Fed Nonmanufacturing Index
21/06/2022	1400/1000	***		US	NAR existing home sales
21/06/2022	1500/1100			US	Richmond Fed's Tom Barkin
21/06/2022	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
21/06/2022	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
21/06/2022	1600/1200			US	Cleveland Fed's Loretta Mester
21/06/2022	1930/1530			US	Richmond Fed's Tom Barkin