MNI ASIA MARKETS ANALYSIS: Employ Down-Revisions Rallies Rates

Tsys Well Bid After Prior Jobs Gains Down Revised

• Treasury futures briefly gapped lower in response to mildly higher than expected June jobs gain of +206k vs. +190k est -- but quickly reversed course, extending session highs after prior jobs data was down revised.
• A small beat for NFP growth of 206k (cons 190k) but with a return of heavy downward revisions. Two-month -111k, split evenly over May and April. Private sees surprises lower though, 136k (cons 160k) along with a -86k two-month revision skewed a little more to April.
• The unemployment rate was stronger than expected as it increased to 4.05% in June (cons 4.0 with some skew to a 3.9 print). The 4.1 rounding on screens exaggerates the increase, but it's another 0.1pp increase from 3.96% in May and 3.86% in April.
• Tsy Sep'24 10Y futures traded down to 109-17.5 low before rebounding to 110-17.5 high. Late buying saw the contract trading 110-19 (+17.5). Technical resistance at 111-01 High Jun 14 and the bull trigger.
• Focus turns to June CPI next Thursday and PPI Friday. The latest equity earnings cycle kicks off next week Friday as well, banks headlining: Wells Fargo, Bank of NY Mellon, JP Morgan and Citigroup.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00468 to 5.32743 (-0.00974/wk)
• 3M -0.00737 to 5.30689 (-0.01771/wk)
• 6M -0.01049 to 5.22647 (-0.02824/wk)
• 12M -0.01484 to 5.00549 (-0.03455/wk)

• Secured Overnight Financing Rate (SOFR): 5.33% (-0.02), volume: $2.007T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $756B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $742B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $88B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $257B

FED Reverse Repo Operation

RRP usage continues to recede with the latest read at $390,632B from $425.898B prior. Number of counterparties falls to 68 from 70 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

SOFR/TEASURY OPTION SUMMARY

While Treasury option focus segued to puts by late morning, SOFR options continued to lean toward upside calls as underlying futures drifted tear this morning's post-June employment data highs. Projected rate cut pricing looks steady to higher at year end vs' pre data levels (*): July'24 at -8.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -20.5bp, Nov'24 cumulative -31.7bp (-29.9bp), Dec'24 -50.8bp (-48.3bp). Salient flow includes:

• SOFR Options:
  • Block, 6,750 SFRU4 94.75/94.81/94.87/94.93 call condors, 1.25 ref 94.885
  • Block, 8,000 0QN4 96.00 puts, 8.5 vs. 96.00/0.50%
  • Block, 10,000 SFRZ4 95.12/95.37/95.50/95.75 call condors, 5.5 ref 95.22
  • Block, 10,000 SFRU4 94.75/94.81/94.87/94.93 call condors, 1.5 ref 94.89
  • +5,000 SFRZ4 95.25 calls, 17.0 ref 95.215
  • -10,000 SFRH5 96.25/96.75 call spds, 5.0
  • 5,000 SFRU4 94.87 puts, 6.0 ref 94.88
  • Block, 8,000 SFRZ4 94.75/94.87 put spds, 2.5 vs. 95.18/0.10%
  • ongoing +1,500 SFRZ4 95.06/95.18/95.31 call flys
  • 10,000 SFRU4 94.75 puts ref 94.87
  • 3,000 SFRQ4 94.93 calls, 3.5 ref 94.87
  • 1,500 SFRH5 94.62/95.12 2x1 put spds
  • +20,000 SFRZ4 95.06/95.18/95.31 call flys - adds to 10k Blocked overnight at 1.75
  • +6,500 0QN4 96.00/96.18/96.37 call flys, 3.0 ref 95.915, partially blocked
  • +5,000 SFRN4 94.75/94.81 put spds, 0.75
  • 2,800 SFRQ4 94.81 puts ref 94.87
  • 2,500 0QN4 96.00/96.12 call spds, 3.5 ref 95.90
  • 2,700 0QU4 96.00/96.50 call spds, ref 95.875
• Treasury Options:
  • 5,000 Wednesday weekly/TYQ4 110.5 straddle spds, 40
  • 4,600 USU4 108/112 put spds, 13 ref 118-09
  • 10,000 wk2 TY 107.25/108 2x1 put spds ref 110-12, exp July 12
  • 7,000 Wednesday weekly TY 109.5/110.5 strangles ref 110-11 expire next Wednesday
  • 2,000 TYU4 108/109 2x1 put spds, ref 110-12
  • -12,000 TYU4 108 puts, 19 vs. 110-02.5/0.20%
  • -10,000 TYQ4 110.5 calls, 31
  • +7,500 FVQ4 107.75/108.25 call spds, 4 ref 106-22
  • +4,000 TYU4 110.5/111 call spds, 12
  • 3,300 TYQ4 110 calls, 42
  • 2,300 TYQ4 111.5 calls, 12 ref 109-28.5

FOREX: Greenback Little Changed Following NFP, Moderate GBPUSD Strength Persists

• The greenback whipsawed in the aftermath of the US employment data on Friday, showed a small beat for NFP growth, but heavy 111k downward revisions to the two previous months. A very small upward revision to the unemployment rate leaves the USD index marginally in the red as we approach the close.
• USDJPY was the most volatile, briefly trading down to 160.35 and capitalising on an earlier yen rebound. However, markets lacked conviction following the US holiday and USDJPY whipped back above 161.00, a level at which the pair has been consolidating ahead of the weekend close.
• In contrast, EURUSD trade remained very subdued on Friday, keeping just a 38 pip range for the entire session. The mixed data kept fresh positioning in check, potentially exacerbated by the upcoming 2nd round election in France this weekend.
• UK election results came and went with little market reaction. As expected over the past few weeks and months, the opposition Labour party won a sizeable majority in the Commons, and will form the next government, displacing the Conservatives and ousting the PM Sunak. GBP initially proved relatively unresponsive, however, the firm footing for equity markets has helped GBPUSD rise 0.3% on Friday. This has also helped EURGBP edge further from well touted resistance at 0.8500, a level that held well earlier in the week.

FX OPTIONS: Expiries for Jul08 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0785(E1.8bln)
• GBP/USD: $1.2500(Gbp1.4bln)
• USD/JPY: Y157.25($1.8bln), Y160.00($624mln), Y161.00-15($755mln)
• EUR/JPY: Y171.85-00(E675mln)
• AUD/USD: $0.6700-20(A$2.4bln), $0.6750-65(A$930mln)
• USD/CAD: C$1.3710($594mln)
• USD/CNY: Cny7.3000($1.1bln)

Late Equities Roundup: Near New Cycle Highs

• Stocks are trading modestly higher in late Friday trade, the DJIA rebounding off lows to join S&P Eminis and Nasdaq indexes after both made new all-time highs (5,605.00 and 18,294.09 respectively) earlier in the session. Currently, the DJIA is down up 42.57 points (0.11%) at 39350.39, S&P E-Minis up 27 points (0.48%) at 5617.25, Nasdaq up 144.3 points (0.8%) at 18332.69.
• Communication Services and Consumer Discretionary sectors continue to lead gainers in the second half, interactive media/entertainment shares supported the former: Meta +4.85%, Google +2.60%, Netflix +1.25%. Broadline retailers buoyed the latter: Constellation Brands +2.96%, Costco +2.58%, Walmart +2.49%.
• On the flipside, Energy and Industrial sectors continued to underperform, oil and gas shares weighing on the former as crude traded weaker (WTI -0.60 at 83.28): Valero -3.95%, APA -3.06%, Marathon Petroleum -2.94%. Meanwhile, air lines weighed on the Industrial sector with Southwest -4.72%, United -3.05%, Delta -2.36%.
• Reminder, the latest equity earnings cycle kicks off in earnest Friday next week, banks headline: Wells Fargo, Bank of NY Mellon, JP Morgan and Citigroup.

E-MINI S&P TECHS: (U4) Fresh All-Time High

• RES 4: 5713.31 3.236 proj of the Apr 19 - 29 - May 2 price swing
• RES 3: 5668.00 3.00 proj of the Apr 19 - 29 - May 2 price swing
• RES 2: 5622.69 2.764 proj of the Apr 19 - 29 - May 2 price swing
• RES 1: 5621.00 Intraday high
• PRICE: 5618.00 @ 1450 ET Jul 5
• SUP 1: 5505.46/5411.41 20- and 50-day EMA values
• SUP 2: 5267.75 Low May 31 and key support
• SUP 3: 5213.25 Low May 6
• SUP 4: 5155.75 Low May 3

The trend condition in S&P E-Minis remains bullish. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This break confirmed a resumption of the primary uptrend. The move higher this week confirms a recent bull flag formation on the daily scale. This is a continuation pattern and reinforces bullish conditions. Sights are on 5622.69, a Fibonacci projection. Support to watch is 5505.46, the 20-day EMA.

COMMODITIES Precious Metals Rally After US Labour Market Data

• Spot gold has risen by 1.4% on Friday to $2,390/oz, taking total gains this week to 2.7%.
• The yellow metal has risen to its highest level since May 22, supported by the soft US employment data, which pointed to a cooling labour market.
• From a technical perspective, gold continues to trade inside a range for now. A clear break of initial firm resistance at $2,387.8, the Jun 7 high, would be a bullish development. Key resistance is at $2,450.1, the May 20 high.
• Silver is also up by 3.1% on the day at $31.4/oz, leaving the precious metal 7.7% higher on the week.
• Silver is trading above first resistance at $30.853, the Jun 21 high. A clear break would be a bullish development, opening $32.518 next, the May 20 high.
• Copper has seen another strong rally today, with the red metal gaining for a sixth consecutive session.
• Copper is currently up by 2.9% at $466/lb, taking total gains this week to over 6%.
• Despite this week’s gains, a bearish corrective cycle that started May 20 remains in play. Initial resistance to watch is $489.25, the May 29 high.
• Meanwhile, WTI is set to end the week up around 1.9%. However, it has lost ground today as US close approaches. Front month remains within the three-day trading range.
• WTI Aug 24 is down 0.7% at $83.3/bbl.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
07/07/2024	-			FR	Second round election
08/07/2024	2301/0001	**		UK	KPMG/REC Jobs Report
08/07/2024	0130/1130	**		AU	Lending Finance Details
08/07/2024	0500/1400			JP	Economy Watchers Survey
08/07/2024	0600/0800	**		DE	Trade Balance
08/07/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
08/07/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
08/07/2024	1615/1715			UK	BoE Haskel at ESCoE
08/07/2024	1900/1500	*		US	Consumer Credit