MNI ASIA MARKETS ANALYSIS: Back To Pre-FOMC Levels

US TSYS: Cautious Risk Appetite Gains Momentum

US rates trade sideways through the second half, finishing near session lows, yield curves steeper with short end outperforming. Early risk-on tone gained momentum in late morning trade as stocks climbed to two-week highs: SPX eminis back to June 13 levels, ESU2 currently at 3899.0 (+99.25) vs. post FOMC low of 3649.00. DJIA +718 (2.34%) at 31397.09; Nasdaq +303 (2.7%) at 11536.68.

• Tsys opened with a modest risk-on tone on firmer stocks, pared losses/traded steady to mildly higher after U-Mich 5-10Y inflation exp revised lower to 3.1%, home sales strong +10.7% to 696k - much better than estimated 590k.
• Short end Eurodollar futures spiked just prior to U-Mich data: EDU2 gapped +0.095 to 96.785 a minute before the data release before tapping 96.79 briefly after some two-way flow. Currently +0.060 at 96.75, dragging EDZ2 0.060 higher as more aggressive rate hike pricing into year end cools slightly.
• Meanwhile, Fed monetary tightening will slow the economy but is unlikely to push it into recession because household wealth is high and business activity is strong, St. Louis Fed President James Bullard said Friday.
• "I think it's a little early to have this debate about recession probabilities in the U.S.," Bullard told an event sponsored by UBS. "We'll slow down to a trend pace of growth as opposed to below trend."
• Reminder, shortened work week next week (early Fri close, Mon holiday for 4th of July), Tsys will have two bill and 2 note auctions Monday:
  • US Tsy $46B 2Y note and $42B 26W bill auctions at 1130ET
  • US Tsy $47B 5Y Note and $45B 13W bill auctions at 1300ET

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N +0.00514 to 1.57614% (+0.00881/wk)
• 1M +0.00914 to 1.63271% (+0.02042/wk)
• 3M +0.03714 to 2.23443% (+0.13857/wk) * / **
• 6M +0.03128 to 2.86657% (+0.08714/wk)
• 12M +0.01142 to 3.54471% (-0.04115/wk)
• * Record Low 0.11413% on 9/12/21; ** New 2+Y high: 2.19729% on 6/23/22

• Daily Effective Fed Funds Rate: 1.58% volume: $84B
• Daily Overnight Bank Funding Rate: 1.57% volume: $257B

• Secured Overnight Financing Rate (SOFR): 1.44%, $944B
• Broad General Collateral Rate (BGCR): 1.46%, $368B
• Tri-Party General Collateral Rate (TGCR): 1.45%, $358B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $2,180.984B w/ 97 counterparties vs. record high in prior session of $2,285.428B.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• SOFR options set the theme was flurry of limited up- and downside flys in late morning trade:
  • +8,000 (3k Block) SFRQ2 97.12/97.25/97.37 call flys, 1.5
  • +8,000 (3k Block) SFRU2 97.12/97.25/97.37 call flys, 1.25
  • +5,000 SFRV2 95.75/96.00/96.25 put flys, 2.0
• Treasury Option vol sales via 10Y strangles included -7,500 TYQ 116/119 strangles, 62-61, -3,000 TYU 115/121 strangles, 114-112. Reminder, July Treasury options expire today.

• +8,000 (3k Block) SFRQ2 97.12/97.25/97.37 call flys, 1.5
• +8,000 (3k Block) SFRU2 97.12/97.25/97.37 call flys, 1.25
• +5,000 SFRV2 95.75/96.00/96.25 put flys, 2.0
• Block, +2,500 SFRU2 96.68/96.87/97.03 put flys, 3.25
• +1,000 short Sep 97.00/97.25/97.75 broken call trees, 1.5 ref 96.78
• Block, 3,583 short Jul 96.12/96.62 put spds, 10.0 vs. 96.78/0.24%

• 2,000 Dec 98.00 calls
• 2,000 short Sep 96/97 strangles
• 5,000 Sep 100.25 calls, 2.0
• 5,000 short Jul 96.00/96.25 put spds

• -7,500 TYQ 116/119 strangles, 62-61
• Block, 15,000 TYU 115 puts, 50 vs. 117-12/0.28%
• 21,000 wk1 TY 113/114 put spds
• Block, 10,000 TYQ 116 puts, 31 vs. 117-24/0.26%
• +8,000 TYQ 115.5 puts, 25 vs. 117-19.5/0.21%
• -3,000 TYU 115/121 strangles, 114-112
• 6,000 FVN 111 puts, 1.5
• 8,800 TYN 116.75 puts, 1
• 5,000 TYN 117.75/118.25 call spds, 2

FOREX: Firmer Risk Sentiment Dents Greenback, Boosts AUD, CAD & NZD

• While USDJPY reversed the entirety of its overnight losses to print fresh highs at 135.40, the move appeared to be Yen led, with the USD index retreating 0.2%. The index held a relatively narrow range all week, respecting the 1.04-1.05 parameters.
• With an uptick in risk sentiment leading to much firmer major equity indices, the likes of Aussie, Kiwi and the Canadian Dollar were outperformers, rising between 0.55-0.75%.
• Meanwhile, Scandi currencies inched higher, with the NOK among the best performers following yesterday's sizeable Norges Bank rate hike. Despite the NOK strength, EUR/NOK remains in a decent uptrend, with recent highs at 10.54 still well within range. Trend signals also hold bullish, with the 50-dma forming a golden cross formation at the beginning of last week.
• In emerging markets, there was some late volatility for the Turkish Lira following Turkey’s banking regulator banning commercial lira loans to some corporate borrowers if their FX cash position exceeds a certain level relative to their assets or annual sales. USDTRY fell aggressively from around 17.35 all the way to 16.50 before paring some of the move approaching the close. The pair remains around 3.5% lower on Friday.
• Monday sees a fairly light data calendar throughout Asia and European timezones. US durable goods and pending home sales data headlines the US docket.

FX: Expiries for Jun27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0445-55(E1.5bln)
• USD/JPY: Y135.00($603mln), Y137.00($550mln)
• USD/CAD: C$1.2920($835mln)

Late Equity Roundup: 2W Highs

Stock looking to finish the week stronger, SPX eminis back to June 13 levels, ESU2 currently at 3899.0 (+99.25) vs. post FOMC low of 3649.00. DJIA +718 (2.34%) at 31397.09; Nasdaq +303 (2.7%) at 11536.68.

• Risk-on logic as far as it goes -- that while recession cares and near term rate hikes remain, Stocks are gaining as second month of weak PMI data is tempering rate hike expectations by year end with some models looking for rate cuts by first half of 2023.
• SPX leading/lagging sectors: Financials gaining after US Banks passed 2022 Fed Stress Tests late Thu, bank shares +3.61%. Next up: Materials, Industrials and Communication Services all clustered around +3.38%. Laggers: Midweek support wanes for Health Care (+1.21%) followed by Consumer Staples and Utilities, both +1.77%.
• Dow Industrials Leaders/Laggers: Financials strong as noted, Goldman Sachs (GS) +15.63 at 301.80, while Visa (V) +7.32 at 203.96; SalesForce (CRM) +11.80 at 184.85, Boeing (BA) +7.50 at 141.47. Laggers: stronger all week, United Health (UNH) -8.44 at 491.37 after annc purchase of UK health care group EMIS earlier in week.

E-MINI S&P (U2): Gains Considered Corrective

• RES 4: 4396.75 High Apr 22
• RES 3: 4308.50 High Apr 28
• RES 2: 4047.65/4204.75 50-day EMA / High May 31
• RES 1: 3843.00/3893.38 High Jun 15 / 20-day EMA
• PRICE: 3899.00 @ 1525ET June 24
• SUP 1: 3639.00 Low Jun 17 and the bear trigger
• SUP 2: 3578.27 0.618 proj of the Mar 29 - May 20 - 31 price swing
• SUP 3: 3500.00 Round number support
• SUP 4: 3384.75 0.764 proj of the Mar 29 - May 20 - 31 price swing

A bearish threat in S&P E-Minis remains present despite this week’s recovery and short-term gains are considered corrective. Moving average studies are in a bear mode condition and recent fresh cycle lows point to a continuation of the trend. The focus is on 3600.00 next, and below. Initial resistance is at 3843.00, the Jun 15 high. The next firm resistance is seen at 3893.38, the 20-day EMA. A break would signal scope for a stronger short-term recovery.

COMMODITIES

• WTI Crude Oil (front-month) up $3.19 (3.06%) at $107.46
• Gold is up $7.17 (0.39%) at $1829.92

Monday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
27/06/2022	0700/0900	**		ES	PPI
27/06/2022	1230/0830	**		US	durable goods new orders
27/06/2022	1400/1000	**		US	NAR pending home sales
27/06/2022	1430/1030	**		US	Dallas Fed manufacturing survey
27/06/2022	1530/1130	*		US	US Treasury Auction Result for 2 Year Note
27/06/2022	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
27/06/2022	1700/1300	*		US	US Treasury Auction Result for 13 Week Bill
27/06/2022	1700/1300	*		US	US Treasury Auction Result for 5 Year Note
27/06/2022	1830/2030			EU	ECB Lagarde Opens ECB Forum
27/06/2022	1900/2100			EU	ECB Schnabel on Financial Stability at ECB Forum