MNI ASIA MARKETS ANALYSIS: Fed Gov Bowman: More Work For Fed

HIGHLIGHTS

• MNI: WORLD BANK CUTS 2023 GDP EST. TO +1.7%, WARNS OF RECESSION RISK
• MNI FED: Gov. Bowman: Fed Has A Lot More Work To Do
• YELLEN TO STAY ON AT BIDEN REQUEST AS SHOWDOWN NEARS OVER DEBT, Bbg
• U.S. EIA RAISES FORECAST FOR 2023 WORLD OIL DEMAND GROWTH BY 50,000 BPD, NOW SEES 1.05 MLN BPD YR-ON-YR INCREASE- U.S. EIA SAYS

US TSYS: Fed Chair at Riksbank Central Bank Conf a Non-Event

• No relevant data on the day (in-line Wholesale Inventories at1.0%) markets were more focused on Fed Chairman Powell remarks at a Riksbank panel on central bank independence. Non-event as Powell repeated his view that the Fed has "narrow" responsibilities on climate change, a stance for which he faced opposition from Democratic lawmakers during his renomination hearing last year.
• Another strong session for corporate issuance, rate locks tied to a $10B Saudi Arabia three-tranche debt issuance weighed.
• Treasury futures saw modest bounce off lows after decent $40B 3Y note auction (91282CGE5) stopped through: 3.977% high yield vs. 4.000% WI; 2.84x bid-to-cover vs. 2.55x last month. Indirect take-up to 69.54% vs. 61.71% prior; direct bidder take-up at 13.18% vs. 20.44% prior; primary dealer take-up 17.28% vs. 17.85%.
• Focus turns to Thursday's CPI MoM (0.1%, -0.1%); YoY (7.1%, 6.5%).

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00358 to 4.30871% (-0.00472/wk)
• 1M +0.02557 to 4.42986% (+0.02829/wk)
• 3M +0.02329 to 4.80586% (-0.00400/wk)*/**
• 6M +0.00086 to 5.14186% (-0.05514/wk)
• 12M -0.02815 to 5.43371% (-0.12526/wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 4.81171% on 1/5/23

• Daily Effective Fed Funds Rate: 4.33% volume: $106B
• Daily Overnight Bank Funding Rate: 4.32% volume: $287B

• Secured Overnight Financing Rate (SOFR): 4.31%, $1.127T
• Broad General Collateral Rate (BGCR): 4.27%, $437B
• Tri-Party General Collateral Rate (TGCR): 4.27%, $401B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage slips to $2,192.942B w/ 102 counterparties vs. prior session's $2.199.121B. Compares to Friday, Dec 30 record/year-end high of $2,553.716B (prior record high was $2,425.910B on Friday, September 30.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• SOFR Options:
  • Block, 5,000 SFRU3 95.00/95.43 1x2 call spds, 0.5 net/2-leg over ref 95.245
  • 2,000 SFRU3 95.5/96.00/96.50 call flys
  • Block, 5,000 SFRU3 94.75 puts, 10.5 vs. 95.245/0.24%
  • Block, 9,500 SFRZ3 97.50/98.50 call spds, 3.5
  • Block, 2,500 SFRM3 94.68/94.81/94.93/95.06 put condors, 3.25
  • Block, 2,500 SFRU3 94.68/94.81/94.93/95.06 put condors, 2.0
  • Blocks, over -14,000 SFRZ3 95.62 straddles, 81.0-82.0
  • Block, total 5,030 SFRH3 94.93/95.06/95.18 put flys, 2.5
  • 7,750 OQF3 96.12/96.25 call spds, ref 96.075
  • 5,000 SFRF3 95.25/95.37 call spds, ref 95.105
  • 10,000 OQF3 96.00 puts, ref 96.075
  • Large put condor roll 5.5 net cr:
  • +28,953 SFRJ3 94.62/94.87/95.00/95.25 put condors, ref 95.075-.080 vs.
  • -27,153 SFRH3 94.62/94.87/95.12/95.38 put condors, ref 95.105-.085
  • 3,000 SFRF3 95.00 puts, 1.0 ref 95.11-.115
  • Block, 2,000 SFRH3 95.12/95.18/95.25/95.37 call condors, 1.0 net ref 95.115
  • 6,150 SFRG3 95.31 calls ref 95.105-.115
  • Block, 3,750 SFRG3 95.18/95.31/95.43 call flys, 2.5
• Treasury Options:
  • 1,000 USG 117/120/124 2x3x1 put flys ref 128-03
  • 6,000 TYG3 115 calls, 19 ref 113-31
  • over 27,000 TYG3 115.25 calls, 17-20
  • 10,000 wk2 TY 114.5 calls, 26 ref 114-02.5
  • 4,000 TYH3 111/112/114 broken put flys, 31 ref 114-05
  • 2,000 TYG3 110.5 puts, 2 ref 114-09
  • 1,500 TYG3 113/113.25/114 put trees, 1 net ref 114-09.5
  • +2,000 FVG 110 calls, 11
  • +7,150 FVH3 105.25 puts, 2 ref 109-04

EGBs-GILTS CASH CLOSE: Supply Weighs

European core FI weakened Tuesday as extremely heavy corporate and sovereign supply weighed.

• Bunds sold off steadily throughout the session and underperformed Gilts. The German curve bear steepened, with the UK's mixed.
• With Bunds selling off, periphery EGB spreads compressed, with 10Y BTP/Bund dipping below 190bp for the first time since Dec 13.
• Central bank speakers at a Riksbank symposium delivering little impactful communication (Fed Chair Powell's absence of pushback against the recent easing of financial conditions sparked a brief modest rally)
• Attention was on heavy supply, with E39bln of sales including corporates (2nd biggest volume day ever, per BBG).
• Wednesday sees several ECB speakers including Holzmann, Villeroy, Rehn and de Cos; the week's major event remains US CPI Thursday.

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

• Germany: The 2-Yr yield is up 4.2bps at 2.654%, 5-Yr is up 7.8bps at 2.344%, 10-Yr is up 8bps at 2.308%, and 30-Yr is up 6.9bps at 2.249%.
• UK: The 2-Yr yield is up 3.3bps at 3.478%, 5-Yr is up 1.9bps at 3.465%, 10-Yr is up 3.1bps at 3.557%, and 30-Yr is down 3.8bps at 3.907%.
• Italian BTP spread down 4.4bps at 191.4bps / Spanish down 1.8bps at 102.7bps

FOREX: Currency Markets Consolidating Ahead Of Key US Data

• Tuesday did little to alter the narrative across currency markets with the greenback trading in slightly firmer territory but largely consolidating following the renewed weakness seen since Friday’s data.
• The greenback did have a small move lower after the release of Fed Chair Powell’s speech where some potential outside expectations that he might push back against some of the recent dovish re-pricing failed to come to fruition.
• While most of those moves largely reverted to prior levels, EURUSD does sit a little higher on the day, showing clear and relative outperformance to its G10 counterparts.
• A strong recovery extended Monday in EURUSD, confirming the end of the recent corrective pullback. The bull trigger at the Dec 15 high at 1.0735, has been cleared and this confirms a resumption of the uptrend. The break higher maintains the bullish price sequence of higher highs and higher lows and note that MA studies are in a bull-mode position. The focus is on 1.0787, the May 30, 2022 high.
• CNH sits slightly lower on an intraday basis, but USD/CNH did manage a lower low during Asia-Pac hours. This put the pair at new multi-month lows of 6.7589. 6.7359 sits as next support, the Aug 15 2022 low.
• In emerging markets, it is worth noting some outperformance for LatAm currencies where USDMXN is hovering at near 3-year lows and the Brazilian Real continues to bounce back following the weekend’s heightened social unrest.
• Aussie CPI & Retail Sales data is due overnight, however, markets will quickly turn their focus to the key release of US CPI on Thursday.

FX: Expiries for Jan11 NY cut 1000ET (Source DTCC)

Late Equity Roundup: Near Highs, Consumer Services/Discretionary Bid

Major indexes trade moderately firmer, near late session highs in late trade, with Consumer Services and Consumer Discretionary sectors outperforming. SPX eminis currently trade +15 (0.38%) at 3928.5; DJIA +88.7 (0.26%) at 33606.17; Nasdaq +69.7 (0.7%) at 10705.11.

• SPX leading/lagging sectors: Consumer Discretionary (+0.90%) lead by internet retailers (AMZN +2.84%, EBAY +2.49%, ETSY +3.43%) session support tempered by modest reversal for auto makers paring Monday rally (TSLA -1.73%). Consumer Services a close second (+0.89%) lead by telecom names (LUMN +2.32%, T +1.89%, VZ +1.0%).
• Laggers: Utilities (-0.45%), Consumer Staples (-0.26%) and Real Estate (-0.05%) underperformed. Estate investment (KIM -3.27%, WY -2.01%) weighed on otherwise RE management names (HST +2.16$, BXP +1.93%).
• Dow Industrials Leaders/Laggers: Goldman Sachs (GS) +3.96 at 356.96, Visa (V) +3.57 at 222.17, AMGN +3.19 at 273.31 and Caterpillar (CAT) +2.94 at 249.56 continued to lead gainers in late trade. Laggers: United Health (UNH) -5.38 at 484.68, Boeing (BA) -1.46 at 207.11, JNJ -0.6 at 174.98.

E-MINI S&P (H3): Breaches The 50-Day EMA

• RES 4: 4180.00 High Dec 13 and the bull trigger
• RES 3: 4043.00 High Dec 15
• RES 2: 4000.00 Round number resistance
• RES 1: 3973.25 High Jan 9
• PRICE: 3932.0 @ 1520ET Jan 10
• SUP 1: 3788.50/78.45 Low Dec 22 / 61.8% of Oct 13-Dec 13 uptrend
• SUP 2: 3735.00 Low Nov 3
• SUP 3: 3670.00 76.4% retracement of the Oct 13 - Dec 13 uptrend
• SUP 4: 3735.00 Low Oct 21

S&P E-Minis traded higher Monday but failed to hold on to the session high and closed at the day low. Key resistance at 3917.35, the 50-day EMA, has been breached. A continuation higher and a clear break of this EMA would suggest potential for a stronger recovery and highlight a possible reversal that would open 4000.00 next. On the downside, a break lower would confirm a resumption of the downtrend - the bear trigger is 3788.50, the Dec 22 low.

COMMODITIES: Crude Oil Edges Higher But Remains Rangebound

• Crude oil has eked out gains today as near-term demand concerns clash with upside risks from Russian supply and a Chinese demand recovery this year. The high uncertainty in both demand and supply is keeping oil bouncing within a range with no clear direction.
• The EIA’s short-term energy outlook sees the US accounting for the lion’s share of non-OPEC oil growth in 2024 as American drillers produce a record 12.8mbpd, above the projected 12.4mbpd for 2023.
• WTI is +0.7% at $75.17, off resistance at $76.50 (20-day EMA) and support at $72.46 (Jan 5 low). The CLG3 sees some downside protection with most active strikes at $70/bbl puts.
• Brent is +0.6% at $80.13, off resistance at $81.74 (20-day EMA) and support at $77.61 (Jan 5 low).
• Gold is +0.3% at $1877.26, continuing to gain despite higher US yields as it instead benefits from a subdued dollar. Within yesterday’s range, resistance remains at $1896.5 (61.8% retrace of the Mar-Sep bear leg).

Wednesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
11/01/2023	0030/1130	**		AU	Retail Trade
11/01/2023	0900/1000	*		IT	Retail Sales
11/01/2023	1200/0700	**		US	MBA Weekly Applications Index
11/01/2023	1530/1030	**		US	DOE weekly crude oil stocks
11/01/2023	1800/1300	**		US	US Note 10 Year Treasury Auction Result