MNI ASIA MARKETS ANALYSIS: Banks Wag Treasurys; Stock Earnings

Tsys Weaker/Off Lows, Focus On House Debt Ceiling Vote, Equity Earnings

• Front month Treasury futures are currently weaker, but off second half lows, possibly in reaction to late procedural headline regarding the debt ceiling bill: "Republican Debt Ceiling Bill Advances In US House Toward Debate, Possible Vote On Passage" Twitter.
• Rates had sold off on stale FRC bank headlines regarding potential buyers ahead the NY open. As noted in this morning's What to Watch bullet: markets will be keeping a wary eye on First Republic Bank (FRC) headlines.
• Trading desks cited "US GOVERNMENT CURRENTLY UNWILLING TO INTERVENE ON FIRST REPUBLIC - CNBC CITING SOURCES" for a midday downturn in rates, Jun'23 10Y futures falling to 115-110 low, 10Y yield at 3.4259%.
• Curves holding onto steeper profiles (2s10s +5.711 at -49.988%) amid pre-auction and corporate supply related unwinds.
• Stocks on the other hand have reversed midday gains and through 50-day EMA technical support to 4071.25 low.

SHORT TERM RATES

SOFR Benchmark Settlements:

• 1M -0.01427 to 4.98221 (+.08223 total last wk)
• 3M -0.03335 to 5.04542 (+.06226 total last wk)
• 6M -0.06335 to 5.02735 (+.08430 total last wk)
• 12M -0.11819 to 4.74481 (+.06573 total last wk)

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00500 to 4.79571%
• 1M +0.00686 to 5.02457%
• 3M -0.01886 to 5.27271% */**
• 6M -0.03400 to 5.37186%
• 12M -0.08443 to 5.28857%
• * Record Low 0.11413% on 9/12/21; ** New 16Y high: 5.26500% on 4/17/23

• Daily Effective Fed Funds Rate: 4.83% volume: $112B
• Daily Overnight Bank Funding Rate: 4.82% volume: $280B

• Secured Overnight Financing Rate (SOFR): 4.80%, $1.329T
• Broad General Collateral Rate (BGCR): 4.77%, $547B
• Tri-Party General Collateral Rate (TGCR): 4.77%, $540B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage inches up to $2,279.561B w/ 97 counterparties, compares to prior $2,275.402B. 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

Salient trade sums up underlying theme for Wednesday's SOFR options: Unambiguous Year-End Rate Cut Hedge with buyer of +10,000 SFRZ3 95.50/96.00/96.50 call flys with the SFRZ 95.75/96.25/96.75/97.25 call condor, paying 12.5 total to buy both structures, ref 95.72.

• Note, projected rate cut for year end are nearly back to yesterday's highs as short end rates rebounding.
• November cumulative at -28.4bp (-31.1bp Tue) at 4.545, Dec'23 cumulative -50.7bp (-52.1bp Tue) at 4.322. Meanwhile, Jan'24 cumulative back to three 25bp cuts to 4.078%3.
• SOFR Options:
  • +10,000 SFRZ3 97.00 calls, 22.5 vs. 95.66/0.23%
  • Block, 5,000 OQK3 96.00 puts, 2.0 vs. 96.605/0.05%
  • +4,000 SFRU3 95.00/95.12/95.25 call flys, 0.5 ref 95.005
  • +2,000 SFRU3 97.00/97.50 call spds vs. 2QU3 98.50/99.00 call spds .25 net db curve steepener
  • +10,000 SFRZ3 95.50/96.00/96.50 call flys w/ SFRZ 95.75/96.25/96.75/97.25 call condor, 12.5 total db to buy both structures, ref 95.72
  • Block, 2,500 SFRM4 94.50/95.00/95.50 put flys, 4.0 ref 96.665
  • Block, 3,000 SFRN3 95.00/95.25/95.50/95.75 call condors, 5.5 ref 95.285
  • 2,000 SFRZ3 95.75/96.50 call spds vs. OQZ3 97.75/98.50 call spds
  • 2,000 SFRN3 94.68/94.93/95.18/95.43 put condors ref 95.305
  • 3,000 SFRM3 95.00/95.12/95.25 call flys, ref 94.965
• Treasury Options:
  • Block, 7,500 TYN3 113/120 call over risk reversals, 5 net ref 116-07
  • Block, 8,000 TYM3 114.5 puts, 33 ref 115-22.5
  • over 3,000 TYN3 121.5 calls, 18 ref 116-17
  • Block/screen, over 34,000 FVM3 111 calls 30-31.5 ref 110-03.5 to -05
  • over 14,400 FVM 111.25 calls, 25.5-27 ref 110-03.5 to -06
  • 2,200 FVM3 110.75 calls, 34.5 ref 110-03

FOREX: EURUSD Pierces Key 1.1076 Resistance, EURAUD Highest Since Oct'20

• Despite multiple headlines regarding potential government intervention on First Republic Bank prompting volatile two-way trade in G10 currency markets, the USD index looks set to close with 0.4% losses as we approach the APAC crossover.
• The weaker greenback has most noticeably been seen in EURUSD which has advanced 0.55% on Wednesday. Despite fading off the day's highs, the pair has still reversed the entirety of Tuesday’s pullback to breach resistance at 1.1076, the Apr 1 2022 high and recent Apr 14 high. This confirms a resumption of the primary uptrend and opens 1.1127, a Fibonacci retracement.
• Note that moving average studies are in a bull-mode condition highlighting a rising trend. On the downside, key short-term support is unchanged at the 20-day EMA which intersects at 1.0930 today.
• Interestingly, EUR crosses have seen an extension of recent strength amid the weaker equity backdrop and softer CPI prints from the likes of Australia and New Zealand. EUR/AUD has rallied through 1.67 to the upside for the first time since October 2020, opening the path to the 50% retracement for the 2020 - 2022 downleg at 1.7045.
• Rising US yields and the recovery for major equity indices off mid-session lows has prompted a not insignificant 80 pip bounce for USDJPY with the pair now unchanged on the session, just below earlier highs of 133.94.
• We noted that the prior move lower had seen the pair clear initial support at the 20-day EMA which intersected at 133.51. While the breach does suggest scope for a potential continuation lower, bulls will look favourably on the supportive price action late Wednesday. More significant support remains lower down at 132.02, the Apr 13 low, of which a break would strengthen overall bearish conditions. On the upside, key short-term resistance is at 135.13, the Apr 19 high, where a break is required to reinstate the recent bullish theme.
• Focus turns to the Advanced reading of Q1 GDP from the US on Thursday, as well as Core PCE and March Pending Home Sales.

FX: Expiries for Apr27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0750(E1.1bln), $1.0830(E635mln), $1.0900(E723mln), $1.0975(E585mln), $1.1000(E779mln), $1.1040(E1.1bln), $1.1125-26(E650mln)
• USD/JPY: Y135.00($1.2bln)
• GBP/USD: $1.2390-10(Gbp743mln), $1.2425-39(Gbp633mln)
• USD/CAD: C$1.3565-80($1.0bln)
• USD/CNY: Cny6.9500-20($770mln)

US EQUITIES: Extending Late Session Lows

• The next two significant support levels are 4052.50 (Low Mar 30) and 4018.75 (50.0% retracement of the Mar 13 - Apr 18 bull leg).
• Bank headlines have had an untoward effect on indexes today, but nothing obvious on the latest move as Utilities, Industrials, Health Care and Energy sectors underperform.
  
• No positive reaction to a procedural headline regarding the debt ceiling bill: Republican Debt Ceiling Bill Advances In US House Toward Debate, Possible Vote On Passage.

US EQUITIES: (M3) Support At The 50-Day EMA Remains Exposed

• RES 4: 4244.00 High Feb 2 and a bull trigger
• RES 3: 4223.00 High Feb 14
• RES 2: 4198.25/205.50 High Apr 18 and key resistance / High Feb 16
• RES 1: 4164.25 High Apr 24
• PRICE: 4083.75 @ 1430ET Apr 26
• SUP 1: 4077.25 Low Apr 26
• SUP 2: 4061.11 38.2% retracement of the Mar 13 - Apr 18 bull leg
• SUP 3: 4052.50 Low Mar 30
• SUP 4: 4018.75 50.0% retracement of the Mar 13 - Apr 18 bull leg

A strong sell-off in S&P E-minis Tuesday resulted in a break below the 20-day EMA, at 4125.55. This exposes a more important support - the 50-day EMA - that intersects at 4086.99. A clear break of this average would highlight a top and expose 4061.11, a Fibonacci retracement. On the upside, initial firm resistance is seen at 4164.25, the Apr 24 high. A breach of this level would ease the developing bearish threat.

COMMODITIES: Headline Crude Inventories a Larger Draw Than Forecast

• Headline crude oil inventories a big draw at 5.0mln bbls vs. Exp. Draw of 1.1mln bbls
• Gasoline inventories at a draw of 2.4mln bbls vs. Exp. Draw of 1.1mln bbls, while distillates a draw of 577k bbls vs. Exp. Draw of 982k bbls
• Meanwhile refinery utilization at 0.30% vs. Exp. 0.39%

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
27/04/2023	0130/1130	**		AU	Trade price indexes
27/04/2023	0700/0900	**		SE	Economic Tendency Indicator
27/04/2023	0800/1000	**		IT	ISTAT Business Confidence
27/04/2023	0800/1000	**		IT	ISTAT Consumer Confidence
27/04/2023	0900/1100	**		EU	EZ Economic Sentiment Indicator
27/04/2023	1100/0700	*		TR	Turkey Benchmark Rate
27/04/2023	1230/0830	**		US	Jobless Claims
27/04/2023	1230/0830	**		US	WASDE Weekly Import/Export
27/04/2023	1230/0830	*		CA	Payroll employment
27/04/2023	1230/0830	***		US	GDP
27/04/2023	1400/1000	**		US	NAR Pending Home Sales
27/04/2023	1430/1030	**		US	Natural Gas Stocks
27/04/2023	1500/1100	**		US	Kansas City Fed Manufacturing Index
27/04/2023	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
27/04/2023	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
27/04/2023	1615/1815			EU	ECB Panetta at EACB Board Meeting
27/04/2023	1700/1300	**		US	US Treasury Auction Result for 7 Year Note
27/04/2023	1700/1300	*		US	US Treasury Auction Result for Cash Management Bill