MNI ASIA MARKETS ANALYSIS: Little New Gleaned From Jun Minutes

US TSYS: Stocks Gain, Little New Gleaned From June FOMC Minutes

Wide range for rates Wednesday, 30Y Bonds extended session lows ahead midday after blowing past early overnight highs after the NY open. Rates reacted to positive (non-recessionary) data, as 30YY fell below 3.0% briefly to 2.9926% low and have climbed steadily ever since to 3.1223% high.

• Underlying rate futures started to sell-off prior to final June services PMI (52.7 (FLSH 51.6; MAY 53.4), accelerated the sell-off after ISM June services composite Index came in stronger than expected as it only dipped to 55.3 (cons 54.0) from 55.9, contrary to the large miss in last week's manufacturing index, building on the upward revision seen in the final PMI just earlier.
• Little initial reaction to to June FOMC minutes release: "Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting," the minutes said.
• Some see as potential for pause by year end helped stocks bounce: “Participants noted that, with the federal funds rate expected to be near or above estimates of its longer-run level later this year, the Committee would then be well positioned to determine the appropriate pace of further policy firming and the extent to which economic developments warranted policy adjustments.”

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00100 to 1.56243% (-0.00486/wk)
• 1M +0.01586 to 1.80686% (+0.00929/wk)
• 3M +0.04228 to 2.39057% (+0.09771/wk) * / **
• 6M +0.03229 to 2.99886% (+.09957/wk)
• 12M -0.03829 to 3.55400% (-0.01029/wk)
• * Record Low 0.11413% on 9/12/21; ** New 3Y high: 2.39057% on 7/6/22

• Daily Effective Fed Funds Rate: 1.58% volume: $94B
• Daily Overnight Bank Funding Rate: 1.57% volume: $262B

• Secured Overnight Financing Rate (SOFR): 1.54%, $1.042T
• Broad General Collateral Rate (BGCR): 1.51%, $362B
• Tri-Party General Collateral Rate (TGCR): 1.50%, $349B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $2,168.026B w/ 96 counterparties vs. $2,138.280B prior session. Record high stands at $2,329.743B from Thursday June 30.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• Trading desks reported early put buying ahead underlying rally that saw 30YY dip below 3.0% briefly: 2.9926% low, followed by sporadic rounds of put buying as 30YY climbed back to 3.1340% high in the second half.
• Salient flow included a block buys of +20,000 Jul Eurodollar 96.25/96.75 put spds at 8.5, over 11,000 FVU 112 puts at 42 and 5,000 SFRZ2 95.50/96.00/96.25/96.75 put condors, 11.5.

• Block, 5,000 SFRZ2 95.50/96.00/96.25/96.75 put condors, 11.5

• Block, +10,000 Jul 96.25/96.75 put spds, 8.5
• Block, -20,000 Jul 96.62/96.87/97.12 call flys, 9.5 ref 96.765-.76
• +5,000 Mar 96.00/97.00 call over risk reversals, 0.0 vs. 96.50/0.69%
• 21,750 short Dec 100.5 calls, 1.0
• -5,000 Green Aug 97.43/97.62/97.75 call flys, 6.5
• +2,500 Mar 97.00 calls, 35.0 vs. 96.575/0.35%

• 1,500 TYQ 115/116.5/118 put flys, 15
• 9,700 wk3 FV 111 puts, 6
• 10,000 TYU 123 calls, 33 total volume over 18.3k
• near 11,000 FVU 112 puts, 42 last
• +5,000 wk1 TY 119/119.5 put spds, 4-4.5
• 3,500 TYU2 111.5/116 2x1 put spds
• 1,500 TYU 115/119 2x1 put spds
• 3,000 TYU 112.5/114.5/116.5 put flys,
• 1,500 TYQ 119.5/121.25 strangles, 1-10
• 2,500 TYQ 120.5/121.5 call spds, 35
• 2,000 TYQ 119 puts, 32 ref 120-10 -10.5
• 2,000 TYQ 120 straddles
• +10,000 TYQ 115/116 put spds
• -2,500 wk2 FV 113 puts, 10
• -1,250 TYQ 120.5/121.5 call spds, 23

EGBs-GILTS CASH CLOSE: Gilts Underperform Amid Political Drama

Wednesday saw a fresh bout of recessionary-fear-fuelled rallies in core FI for most of the session, though yields reversed higher from mid-afternoon onward.

• It was a day of high drama in UK politics with PM Johnson seemingly under pressure to resign as we headed to the cash close, though political risk was very much a sideshow to global macro considerations.
• UK yields ended higher, with bear flattening in the curve: BoE's Pill and Cunliffe suggested they'd be willing to pursue faster rate hikes.
• German bonds outperformed with the curve twist steepening; periphery EGB spreads finished a little tighter after early widening.

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

• Germany: The 2-Yr yield is down 3.9bps at 0.393%, 5-Yr is down 4.8bps at 0.822%, 10-Yr is up 2.9bps at 1.208%, and 30-Yr is up 2.8bps at 1.525%.
• UK: The 2-Yr yield is up 7.4bps at 1.757%, 5-Yr is up 3.8bps at 1.75%, 10-Yr is up 4.7bps at 2.096%, and 30-Yr is up 7.7bps at 2.541%.
• Italian BTP spread down 3.1bps at 194.6bps / Spanish down 3.4bps at 107.3bps

EGB Options: Plenty Of August Bund Calls

Wednesday's Europe rates / bond options flow included:

• RXQ2 157/158 cs, sold at 6 in 4k
• RXQ2 151/152 cs sold at 58 in 3.3k
• RXQ2 154/155 call spread bought for 25.5 in 3.8k
• RXQ2 154/155.5/157 c fly, bought for 16 in 2k
• RXU2 148/146.5/145.5p fly, bought for 19 in 3k
• DUU2 109.40/109.10 1x1.25 put ratio vs 110.20/110.40 1x1.25 call spread bought for 1.75 in 2.5k

FOREX: Power Prices Continue to Drill EUR Lower

• The power crunch across Europe continues to send recession jitters throughout Eurozone assets, with EUR/USD respecting the deep-seated downtrend channel drawn off the February highs to print a new cycle low Wednesday. Continued upheaval in gas and oil markets put German energy futures at fresh record levels, prompting a further pullback in year-end ECB policy rate expectations, which now imply a deposit rate of less than 0.75% - a near 50bps reversal off the levels seen in mid-June. EUR/USD's new low at 1.0162 marks the weakest level since 2002 for the pair.
• Political tumult continued to roil UK markets, with GBP/USD weaker as traders watch for what seems like the imminent resignation of the Prime Minister. That said, GBP fared generally well against the likes of the EUR, AUD and NZD - indicating that uncertainty surrounding UK governmental policy has been well priced in after a volatile few weeks for Boris Johnson. GBP/USD printed a new YTD low at 1.1876, but traded at the week's best levels against the EUR during the Wednesday session.
• JPY was the main beneficiary of the risk-off backdrop, rising against all others in G10. AUD/JPY eyes support at last week's lows of Y91.43 ahead of the 100-dma of Y90.72.
• Focus Thursday turns to the weekly US jobless claims releases as well as German industrial production and Canada's Ivey PMI. Central bank events include the release of the ECB's meeting accounts as well as speeches from ECB's Lane, Stournaras and Centeno as well as Fed's Waller and Bullard.

Expiries for Jul07 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0100(E1bln), $1.0215-25(E1.2bln), $1.0275(E830mln), $1.0290-00(E1.1bln), $1.0325(E578mln), $1.0345-55(E1.1bln)
• USD/JPY: Y135.00($957mln), Y136.00-20($1.2bln), Y137.00($760mln)
• GBP/USD: $1.2000(Gbp850mln)
• NZD/USD: $0.6270-80(N$680mln)
• USD/CAD: C$1.3000($651mln)
• USD/CNY: Cny6.7000($985mln)

Late Equity Roundup:  Late Session Rally, Tech Shares Strong

• Stocks tracked higher Tsys in early trade, pre-data tone risk-off bid for rates on recession concerns w/ stocks supported on prospect of less aggressive 2H rate hikes. Better than expected data (ISM, PMI) weighed on rates since midmorning.
• SPX leading/lagging sectors: Information Technology (+1.41%) edged past Utilities (+1.32%) as semiconductors, soft- and hardware traded strong. Laggers: Energy sector (-1.36%) trades broadly weaker even as Crude bounced off lows (WTI --0.80 at 98.70), EOG, Hess, Diamondback, Devon, Marathon all weaker. Consumer Discretionary (+0.14%) with consumer services and autos bouncing, followed by Financials (+0.23%).
• Dow Industrials Leaders/Laggers: United Health (UNH) surged +11.85 at 517.09, Microsoft (MSFT) +4.72 at 267.57, Travelers Ins (TRV) gained 3.75 to 170.95. Laggers: Goldman Sachs (GS) -2.08 at 295.12, Chevron (CVX) -1.61 at 141.05, Caterpillar (CAT) -0.96 at 172.80.

E-MINI S&P (U2): Bearish Threat Still Present

• RES 4: 4308.50 High Apr 28
• RES 3: 4204.75 High May 31 and a key resistance
• RES 2: 3997.82 50-day EMA
• RES 1: 3950.00 High Jun 27
• PRICE: 3856.5 @ 1545ET Jul 6
• SUP 1: 3735.00/3639.00 Low Jun 23 / 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

S&P E-Minis are consolidating but maintain a softer tone following last week’s bearish cycle and reversal from 3950.00, the Jun 28 high. The next support lies at 3735.00, the Jun 23 low. A breach of this level would expose key support at 3639.00, the Jun 17 low. On the upside, clearance of resistance at 3950.00 is required to reinstate a bullish theme. This would open the 50-day EMA, currently at 3997.82.

COMMODITIES: Broad Downward Pressure

• Crude oil prices have slid 1-2% today on broader economic fears, seeing little respite from an improvement in US data that drove Treasury yields significantly higher.
• The US and its allies have discussed capping Russian oil prices at $40-60/bbl with a more specific threshold depending on market conditions, Hungary reiterated it would be “physically impossible” to replace Russian oil and Al-Ghais has been appointed the new OPEC+ Secretary General (a diplomatic role that can be valuable during periods of uncertainty).
• WTI is -0.9% at $98.58 having touched three-month lows of $95/bbl and clearing two support levels in the process, the last being $95.47 (May 11 low). A firm break here could open $93.45 (Apr 25 low).
• Brent is -2.1% at $100.66, having stopped just shy of testing support at $98.72 (May 11 low) that could have seen a further ramping up of bearish price activity.
• Gold prices have taken another leg down today, sliding -1.5% to $1738.6 as it competed with higher UST yields and a stronger dollar. It has cleared multiple support levels, the last being $1753.7 (Dec 15, 2021) and next opens $1721.7 (Sep 29, 2021).
• Copper prices (HG1) are currently -0.7% lower after yesterday’s 4.7% slide, seeing little boost from improving US data and leaving them down 32% from the early March peak.

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
07/07/2022	0130/1130	**		AU	Trade Balance
07/07/2022	0545/0745	**		CH	unemployment
07/07/2022	0600/0800	**		DE	Industrial Production
07/07/2022	0600/0800	**		NO	Norway GDP
07/07/2022	0945/1145			EU	ECB Lane on Green Transition at OECD Forum
07/07/2022	1230/0830	**		US	Jobless Claims
07/07/2022	1230/0830	**		US	Trade Balance
07/07/2022	1300/1400			UK	BOE Mann Speaks at LC-MA Forum
07/07/2022	1400/1000	*		CA	Ivey PMI
07/07/2022	1430/1030	**		US	Natural Gas Stocks
07/07/2022	1500/1100	**		US	DOE weekly crude oil stocks
07/07/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
07/07/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
07/07/2022	1605/1705			UK	BOE Pill Speaks at Sheffield Hallam University
07/07/2022	1700/1300			US	Fed Governor Christopher Waller
07/07/2022	1700/1300			US	St. Louis Fed's James Bullard