MNI ASIA MARKETS ANALYSIS: April CPI Not as Hot as Feared

US TSYS: Rates, Stocks Finish on Positive Tone After In-Line CPI

Treasury futures see-saw near late session highs after initial gap bid followed in-line CPI read for April, MoM 0.4%, YoY 5.5%, and off-setting CPI figures: higher used car and medical care services vs. lower than expected lodging and airfare items. Late support tied to nascent hopes of a debt ceiling breakthrough that also buoyed stocks.

• Tsy 10s currently 115-25.5 vs. 115-31 high, yield off 3.4275% low at 3.4502%. Curves steeper but off highs, 2s10s currently +4.186 at -46.584 (-44.525 high).
• Projected rate cuts for late 2023 are firmer but still off last week's highs: November cumulative -53.3bp (-58.7bp last wk) at 4.544%, Dec'23 cumulative -77.9bp (-84.3bp last wk) at 4.293%, while Jan'24 cumulative is running at -101.8bp at 4.048%.
• For a technical perspective, initial resistance at 116-12 High May 5, a resumption of gains would open key resistance at 117-01+, the Mar 24 high. This is the bull trigger.
• Treasury futures had pared gains briefly following the $32B 10Y note auction (91282CHC8) tail: 3.448% high yield vs. 3.437% WI; 2.45x bid-to-cover vs. 2.36x prior. Indirect take-up 67.05% vs. 62.95% prior; direct bidder take-up 19.46% from 19.91% prior; primary dealer take-up falls to 13.04% vs. 17.14% prior.

SHORT TERM RATES

SOFR Benchmark Settlements:

• 1M +0.00279 to 5.05709 (+.00683/wk)
• 3M +0.01418 to 5.09811 (+.05938/wk)
• 6M +0.02049 to 5.05101 (+.10550/wk)
• 12M +0.03473 to 4.73358 (+.17998/wk)

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00114 to 5.06029%
• 1M +0.00229 to 5.10800%
• 3M +0.00329 to 5.34243% */**
• 6M +0.00857 to 5.39843%
• 12M +0.05486 to 5.35286%
• * Record Low 0.11413% on 9/12/21; ** New 16Y high: 5.34243% on 5/10/23

• Daily Effective Fed Funds Rate: 5.08% volume: $112B
• Daily Overnight Bank Funding Rate: 5.07% volume: $277B

• Secured Overnight Financing Rate (SOFR): 5.06%, $1.482T
• Broad General Collateral Rate (BGCR): 5.03%, $574B
• Tri-Party General Collateral Rate (TGCR): 5.03%, $564B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $2,233.149B w/ 104 counterparties, compares to prior $2,222.864B. Compares to high usage for 2023: $2,375.171B on Friday March 31, 2023; all-time record high of $2,553.716B reached December 30, 2022.

SOFR/TREASURY OPTIONS SUMMARY

• SOFR Options:
  • Block, 20,000 SFRU 94.81/94.93/95.12/95.25 put condors, 5.5 ref 95.275
  • Block, 5,000 SFRZ3 95.00 puts, 16.0 vs. 95.725/0.25%
  • -40,000 SFRU3 95.43/95.56 put spds, 9.5 ref 95.265
  • -10,000 SFRM3 94.93/95.00 put spds, 4.75 ref 94.935
  • +2,500 SFRM3 94.81/94.93/95.06 put flys, 6
  • 2,000 SFRU3 94.87/95.00 put spds vs. SFRU3 96.50/97.00 call spds
  • Block/screen, 8,500 SFRN3 95.12/95.37/95.62 call flys, 2.0 ref 95.205
  • 5,000 SFRU3 95.50/95.56/95.62/95.68 call condors ref 95.20
  • 1,750 OQM3 95.56/95.68 put spds, ref 96.605
  • Block, 4,000 OQM3 95.25 puts, 1.0 vs 96.59/0.05%
  • 6,500 SFRQ3 94.75/95.00/95.25/95.50 put condors ref 95.19
  • Block, 5,000 SFRU3 95.12/95.35/95.62 call flys, 1.25
  • 2,000 SFRK3 94.81/94.94 2x1 put spds, ref 94.895
  • 2,000 SFRU3 94.62/94.87 put spds ref 95.185
  • 1,000 SFRU3 94.75/94.87/95.00/95.12 put condors ref 95.19
  • over 12,000 SFRK3 94.93/95.06/95.18 call trees vs. SFRM3 94.93/95.06/95.18 call flys, ref 94.90
• Treasury Options:
  • 15,000 FVM 109 puts, 5.5, total volume over 25k
  • -20,000 FVM 111 calls 18.5-17
  • over 31,500 FVN3 112 calls, 29.5-30 ref 110-14
  • over 12,800 FVN3 109.25 puts, 27-26 ref 110-16
  • over 5,800 FVN3 109.5 puts, 34 ref 110-14

LATE EQUITIES ROUNDUP: Hope or Risk Springs Eternal

• Still off this morning's post-CPI driven highs, stocks are gradually climbing again on hopes over a debt ceiling agreement breakthrough. Not aparent at the time, but Treasury futures and equities both moved higher following Bbg headline: "MCCONNELL SAYS THERE WILL BE EVENTUAL AGREEMENT ON DEBT LIMIT," Bbg.
• At the moment: S&P E-Mini Futures are up 12.5 points (0.3%) at 4146.25; DJIA down 93.14 points (-0.28%) at 33463.57; Nasdaq up 115.8 points (1%) at 12294
• Communication Services and Information Technology sectors lead the rebound in the second half, shares of Google up approximately 4.5% following headlines: GOOGLE REIMAGINING ALL CORE PRODUCTS, INCLUDING SEARCH ... CEO SHOWS HOW USERS CAN USE GENERATIVE AI IN GMAIL, Bbg.
• From a technical point of view, S&P E-minis remain above the 50-day EMA, which intersects at 4103.05. A continuation higher would refocus attention on key resistance and the bull trigger at 4206.25, the May 1 high. A breach of this level would confirm a resumption of the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this support would be bearish.

E-MINI S&P TECHS: (M3) Remains Above The 50-Day EMA

• RES 4: 4288.00 High Aug 19 2022
• RES 3: 4244.00 High Feb 2 and a medium-term bull trigger
• RES 2: 4223.00 High Feb 14
• RES 1: 4175.25/4206.25 Intraday high / High May 1
• PRICE: 4164.50 @ 14:21 BST May 10
• SUP 1: 4062.25 Low May 4 and key near-term support
• SUP 2: 4052.50 Low Mar 30
• SUP 3: 4022.75 50.0% retracement of the Mar 13 - May 1 bull leg
• SUP 4: 4006.00 Low Mar 29

S&P E-minis are trading higher today and price remains above the 50-day EMA, which intersects at 4103.05. A continuation higher would refocus attention on key resistance and the bull trigger at 4206.25, the May 1 high. A breach of this level would confirm a resumption of the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this support would be bearish.

COMMODITIES: Crude Markets Still Focused On Weak Demand

• Crude oil is holding onto earlier losses with market focus still on weak demand after the updated EIA inventory data showing a crude build and oil product draws. Gasoline and diesel crack spreads are edging higher driven by the lower inventories and a slight recovery in implied demand.
• WTI is -1.7% at $72.43 off a post-CPI high of $73.87 that came close to resistance at $73.93 (Apr 28 low) before retreating.
• Continued sizeable puts today, with the day’s most active strike at $70/bbl puts but this time followed by $75/bbl calls.
• Brent is -1.5% at $76.28, with its high of $77.56 poking above yesterday’s high and opening resistance at the 20-day EMA of $78.49.
• Gold is -0.2% at $2030.96 having pulled back off a post-CPI high of $2048.19 with the retreat despite Treasury yields continuing to push lower after the 10Y auction. Resistance seen at $2063 (May 4 high).

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
11/05/2023	0130/0930	***		CN	CPI
11/05/2023	0130/0930	***		CN	Producer Price Index
11/05/2023	1100/1200	***		UK	Bank Of England Interest Rate
11/05/2023	1100/1200	***		UK	Bank Of England Interest Rate
11/05/2023	1200/1400			EU	ECB Schnabel Talk at Federal Ministry of Finance
11/05/2023	-			EU	ECB Lagarde & Panetta in G7 Finance Meeting
11/05/2023	1230/0830	**		US	Jobless Claims
11/05/2023	1230/0830	**		US	WASDE Weekly Import/Export
11/05/2023	1230/0830	***		US	PPI
11/05/2023	1245/0845			US	Minneapolis Fed's Neel Kashkari
11/05/2023	1430/1030	**		US	Natural Gas Stocks
11/05/2023	1430/1030			US	Fed Governor Christopher Waller
11/05/2023	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
11/05/2023	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
11/05/2023	1700/1300	***		US	US Treasury Auction Result for 30 Year Bond
11/05/2023	1700/1300	*		US	US Treasury Auction Result for Cash Management Bill
11/05/2023	1730/1930			EU	ECB de Guindos Panels Diario Madrid Foundation Event