MNI ASIA MARKETS ANALYSIS: In-Line PPI Softens CPIs Sting

US TSYS Treasuries See-Saw Off Lows, In-Line PPI Twist Steepens Curve

• Treasury futures are looking to finish mixed Thursday, late support following large 2Y and 5Y Block buys evaporating, though curves hold steeper (2s10s +4.736 at -38.427).
• Volatile morning as Treasury futures drew fast two-way trade after ECB steady rate announcement and largely in-line US Producer Price data brought some relief to global core FI market after Wednesday's hot CPI figure: PPI inflation misses at 0.15% M/M (0.3) in March but core measures in line.
• Initial claims were lower than expected at a seasonally adjusted 211k (cons 215k) in the week to Apr 6 after a marginally upward revised 222k (initial 221k).
• Treasuries dipped briefly after $22B 30Y auction (912810TX6) re-open tailed for the first time in 5 auctions (5.2bp tail in Nov'23): 4.671% high yield vs. 4.662% WI; 2.37x bid-to-cover vs. 2.47x in the prior month.
• Indirect take-up falls to 64.38% (lowest since Nov'23) vs. 69.29% prior; direct bidder take-up climbs to 18.28% vs. 16.77% prior; primary dealer take-up 17.34% (highest since Nov) vs. 13.93%.
• Projected rate cut pricing gained slightly vs. late Wednesday levels: May 2024 at -2.6% w/ cumulative -.6bp at 5.322%; June 2024 at -22.6bs vs. -16.2% earlier (-55.1% pre-CPI) w/ cumulative rate cut -6.3bp at 5.226%. July'24 cumulative at -14.1bp, Sep'24 cumulative -25bp.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00170 to 5.31895 (+0.00049/wk)
• 3M -0.00694 to 5.29892 (+0.00553/wk)
• 6M -0.01793 to 5.23137 (+0.01103/wk)
• 12M -0.02609 to 5.06156 (+0.03049/Wk)

• Secured Overnight Financing Rate (SOFR): 5.31% (+0.00), volume: $1.909T
• Broad General Collateral Rate (BGCR): 5.30% (-0.01), volume: $707B
• Tri-Party General Collateral Rate (TGCR): 5.30% (-0.01), volume: $698B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $86B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $251B

FED Reverse Repo Operation

• RRP usage climbs to $455.361B vs $445.816B on Wednesday. Compares to mid-March low of $413.877B - the lowest level since May 2021.
• Meanwhile, the latest number of counterparties at 69 vs. 67 yesterday, near April 4 2+ year low of 66.

SOFR/TEASURY OPTION SUMMARY

SOFR and Treasury option flow remained mixed late Thursday, two-way trade on heavy volumes with some large unwinds and position adds in calls and puts alternating through the day. Underlying futures see-sawed higher in late trade as stocks climbed back to pre-CPI levels. Projected rate cut pricing gained slightly vs. late Wednesday levels: May 2024 at -2.6% w/ cumulative -.6bp at 5.322%; June 2024 at -22.6bs vs. -16.2% earlier (-55.1% pre-CPI) w/ cumulative rate cut -6.3bp at 5.226%. July'24 cumulative at -14.1bp, Sep'24 cumulative -25bp.

• SOFR Options:
  • 9,000 SFRJ4 94.75/94.81/95.00/95.06 put condors
  • Block, 6,000 SFRM4 94.56 puts, 1.0 vs. 94.74/0.10%
  • -20,000 SFRK4 94.75/94.81/94.87/94.93 put condors, 1.0 ref 94.74
  • -5,000 0QU4 95.62 straddles, 70.0 ref 95.595
  • +4,000 SRM4 94.81/94.93/95.06 call flys 1.5 ref 9474
  • -4,000 SRM4/SRN4 95.00 call spds 9.25
  • +5,000 SRM4 9462/9468 put spds .25 over 9475/9481 call spds
  • +10,000 SRM4 94.75/95.00 call spds 3.75 ref 9474.5
  • -5,000 SFRM4 94.68/94.75 put spds, 4.25 ref 94.73
  • Block, 8,200 SFRZ4 93.75/94.50 2x1 put spds, 4.0
  • Block, 16,000 SFRU4 94.75/94.87 put spds 7.0
  • 2,650 SFRU4 94.50/94.75/95.00/95.12 broken put condors ref 94.875
  • 3,500 SFRZ4 93.75/94.50 2x1 put spds ref 95.07 to -.075
  • 1,000 SFRM4 94.68/94.81/94.87/95.00 call condors ref 94.73
  • 4,000 SFRN4 95.75 calls vs. SFRU4 95.62/96.50 call spds
  • 4,000 SFRU4 94.62/94.87/94.93/95.06 put condors ref 94.865
  • 2,500 SFRU4 94.62/94.87 put spds ref 94.865
  • 1,500 SFRU4 95.00/95.25/95.50/95.75 call condors ref 94.87
  • 2,000 SFRU4 94.87/95.12/95.37/95.62 call condors ref 94.88
  • 1,000 SFRK4 94.62/94.68/94.75/94.71 call condors ref 94.725
• Treasury Options:
  • 10,000 TYM4 110.5/111.5/112.5 call flys, 3 ref 108-06.5
  • 5,000 USK4 115/116 put spds, 34 ref 115-03
  • +10,000 TYM4 109 calls, 43 vs. 108-03
  • +10,000 TYK4 109.5/110 call spds, 3
  • +29,545 TYM4 108 puts, 61 ref 108-06 to -05
  • +8,900 FVM4 105.25 puts, 47 ref 105-08
  • 2,000 TYM4 111/112/113 call flys, 5 ref 108-04.5
  • Block, 14,000 TYM4 108 puts, 56 vs. 108-09/0.30%
  • +30,000 TYM4 111/112/113 call flys, 3 ref 108-11 to -10
  • 2,500 TYK4 107/108 put spds, 16 ref 108-09.5
  • over 5,000 USK4 112/114 put spds, 29 ref 115-24
  • +6,000 TYM4 109.5 calls, 33, total volume over 18k
  • 15,000 TYM4 109 calls, 43
  • 3,500 TYM4 107 puts, 36 ref 108-06.5 to -07
  • over 17,500 FVK4 104.75/105.25 put spds vs. FVK4 105.75 calls
  • 1,500 FVM4 105/106.5 put spds ref 105-08.75
  • 2,500 TYK4 107/107.5 put spds ref 108-09.5
  • 5,000 TYK4 108/109 put spds ref 108-09
  • 5,000 TYK4 107/108 put spds
  • 7,500 TYK4 107/107.5/108 put flys, 1 ref 108-12.5

EGBs-GILTS CASH CLOSE: Selloff Continues Despite ECB Cut Inclination

Gilts underperformed Bunds for a second consecutive session Thursday, with the prior session's strong US CPI data continuing to reverberate.

• The ECB meeting was more or less as expected, with the statement noting that if the inflation comes in as expected, it “would be appropriate” to ease.
• Lagarde provided few revelations in the press conference, noting that while "a few" members were already confident enough in the inflation trajectory to cut rates, a "very large majority" preferred waiting to see incoming data through the June meeting.
• Largely in-line US producer price data brought some relief to global core FI after the hot CPI figure, but the move faded.
• BoE's Greene drew a modestly hawkish reaction at the open after commenting overnight that cuts "should still be a way off".
• 2024 ECB implied cuts were pared by 2bp on the day (now around 76bp), with around 8bp less BoE easing expected (at 49bp, now just under 2 cuts for the year).
• The German curve twist steepened, with the UK short- and long-ends underperforming. Periphery EGB spreads widened.
• Friday's early calendar highlight is UK GDP.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.4bps at 2.962%, 5-Yr is up 1.6bps at 2.477%, 10-Yr is up 2.8bps at 2.463%, and 30-Yr is up 3.1bps at 2.586%.
• UK: The 2-Yr yield is up 5.6bps at 4.403%, 5-Yr is up 5.1bps at 4.103%, 10-Yr is up 5.3bps at 4.201%, and 30-Yr is up 5.8bps at 4.678%.
• Italian BTP spread up 3.8bps at 141bps / Spanish up 1.3bps at 82.1bps

EGB Options: Largely Upside Structures Pre-ECB Decision

Thursday's Europe rates/bond options flow included:

• ERM4 96.12p sold at 1.25 in 9k
• ERQ4 96.50/96.62/96.75c fly bought for 2.25 in 5k
• SFIK4 95.00/95.10cs, bought for 1.75 in 6k
• SFIZ4 95.65/95.75cs, bought for 2.75 in 10k
• OEK4 117/118 RR, bought the call for 1 in 5k
• IKM4 118/120cs 1x2, bought for 31 in 1.4k

FOREX Softer US PPI Details Prompts Moderate Antipodean FX Reversal

• Softer details within today’s US PPI data means the Fed’s preferred core PCE reading will give a softer signal on inflation that Wednesday’s CPI. As such, equity markets were buoyed across Thursday, modestly weighing on the USD index and boosting the likes of AUD and NZD.
• Both AUDUSD and NZDUSD have risen just shy of half a percent, taking back a portion of the significant losses from the prior session.
• The sharp sell-off in AUDUSD Wednesday signals the end of the recent bull phase and reinstates a bearish threat. A continuation lower would signal scope for a test of support at 0.6478, the Mar 5 low. Clearance of this level would expose the bear trigger at 0.6443, the Feb 13 low.
• USDJPY rose as high as 153.32 and continues to trade above the 153.00 mark as we approach the APAC crossover. Bullish conditions were cemented Wednesday on the break of the significant 152.00 level, however, markets will remain wary of Japanese MOF strengthening their rhetoric on potentially intervening in the currency.
• EURUSD touched a near one month low at 1.0699 in the aftermath of the ECB, where the governing council left rates unchanged and pointed to a possible rate cut in June in its post-meeting statement on Thursday, while saying it would keep a data-dependent approach and not commit to a pre-determined easing path.
• UK growth data headlines the calendar on Friday, before UMich consumer sentiment and inflation expectations will be the US focus.

FX Expiries for Apr12 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0600(E914mln), $1.0650-55(E508mln), $1.0700(E2.9bln), $1.0720-30(E1.1bln), $1.0780-00(E1.9bln), $1.0950(E1.0bln)
• USD/JPY: Y149.00-13($1.2bln), Y149.50($1.9bln), Y150.00($1.0bln), Y151.00($927mln), Y152.00($1.0bln), Y152.70-80($1.4bln), Y153.35($520mln)
• GBP/USD: $1.2400(Gbp593mln), $1.2590-00(Gbp1.0bln), $1.2650(Gbp644mln), $1.2750(Gbp1.4bln)
• NZD/USD: $0.6050(N$550mln)
• USD/CAD: C$1.3685($803mln), C$1.3725-27($732mln)
• USD/CNY: Cny7.2500($1.4bln)

Late Equities Roundup: IT, Communication Services Outperforming

• Stocks have managed to climb back nearly to pre-CPI levels late Thursday as markets grew comfortable with this morning's softer PPI as a leavening factor to yesterday's "hot" CPI inflation measures. Currently, DJIA is up 105.39 points (0.27%) at 38565.52, S&P E-Minis up 44.5 points (0.85%) at 5251.75, Nasdaq up 258.7 points (1.6%) at 16429.25.
• Leading Gainers: Information Technology and Communication Services continued to outperform in late trade, chip stocks leading supporting the former: Broadcom +4.94%, Apple +3.90%, Nvidia +3.51%. Interactive media and entertainment shares gained for the second day running: Paramount +7.95%, Warner Bros +3.12% Google +2.13%.
• Laggers: Energy and Financial sectors continued to underperform, the former as crude prices receded from Wednesday highs (WTI -0.89 at 85.32): APA -1.68%, Coterra -1.74%, Devon Energy -1.28%. Insurance companies weighed on the Financial sector: Globe Life tumbling 48% after short seller report from Fuzzy Panda, Aflac -3.22%, Assurant -1.49%.
• Reminder, the next quarterly earnings starts in earnest late this week with JP Morgan, BlackRock, Wells Fargo, State Street and Citigroup reporting Friday, April 12.

E-MINI S&P TECHS: (M4) Corrective Bear Cycle Remains In Play

• RES 4: 5434.54 Bull channel top drawn from the Jan 17 low
• RES 3: 5428.25 1.00 proj of the Oct 27 - Dec 28 - May 1 price swing
• RES 2: 5400.00 Round number resistance
• RES 1: 5308.50/33.50 High Apr 4 / 1 and the bull trigger
• PRICE: 5251.00 @ 1445 ET Apr 11
• SUP 1: 5173.50 Intraday low
• SUP 2: 5155.37 50-day EMA
• SUP 3: 5100.00 Round number support
• SUP 4: 5018.00 Low Feb 21

The trend condition in S&P E-Minis is unchanged and remains bullish. The recent move down highlights a short-term corrective cycle and last week's sell-off plus yesterday’s move lower, reinforces this condition. The contract has breached bull channel support drawn from the Jan 17 low, and cleared the 20-day EMA. A continuation lower would open the 50-day EMA, at 5155.37 and the next key support. Key resistance is 5333.50, the Apr 1 high.

COMMODITIES Crude Futures Trend Lower On Session, Gold Nears All-Time Highs

• Crude is trending lower on the day, with Brent hovering around $90/b. The US dollar consolidating gains and rising US stocks are adding downside. There is also some pullback after yesterday’s spike on reports of “imminent” Iranian retaliatory attacks on Israel, with a strike yet to take place. Brent JUN 24 down 0.78% at 89.75$/bbl and WTI MAY 24 down 1.36% at 85.02$/bbl.
• Despite this, a bull theme in WTI futures remains intact and the latest pullback is considered corrective. Last week’s rally reinforced current conditions and confirmed a resumption of the uptrend.
• OPEC maintained its oil demand growth forecast for 2024 and for 2025 steady, while slightly lowering the non-OPEC supply forecast for this year according to the latest OPEC Monthly Oil Market Report.
• For precious metals, spot gold showed resilience throughout the greenback rally on Wednesday and today’s softer details in the US PPI report have boosted the yellow metal, which zones in on another record high around 2365.
• The latest climb maintains the bullish price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode condition, reflecting positive market sentiment. The $2300.0 handle has been cleared. The next objective is $2376.5, a Fibonacci projection.

FRIDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
12/04/2024	0430/1330	**		JP	Industrial Production
12/04/2024	0600/0700	**		UK	UK Monthly GDP
12/04/2024	0600/0700	**		UK	Trade Balance
12/04/2024	0600/0700	**		UK	Index of Services
12/04/2024	0600/0700	***		UK	Index of Production
12/04/2024	0600/0700	**		UK	Output in the Construction Industry
12/04/2024	0600/0800	***		DE	HICP (f)
12/04/2024	0600/0800	***		SE	Inflation Report
12/04/2024	0600/0700			UK	BOE's Greene Panellist at Delphi Economic Forum on US vs Europe Growth
12/04/2024	0645/0845	***		FR	HICP (f)
12/04/2024	0700/0900	***		ES	HICP (f)
12/04/2024	1100/1200			UK	BOE's Bernanke Review of Forecasting for Monetary Policymaking
12/04/2024	1100/1300			EU	ECB's Elderson Speaks At Delphi Economic Forum
12/04/2024	-	***		CN	Trade
12/04/2024	1200/0800			US	San Francisco Fed's Mary Daly
12/04/2024	1230/0830	**		US	Import/Export Price Index
12/04/2024	1300/0900	*		CA	CREA Existing Home Sales
12/04/2024	1400/1000	**		US	U. Mich. Survey of Consumers
12/04/2024	1700/1300	**		US	Baker Hughes Rig Count Overview - Weekly
12/04/2024	1700/1300			US	Kansas City Fed's Jeff Schmid
12/04/2024	1830/1430			US	Atlanta Fed's Raphael Bostic
12/04/2024	1930/1530			US	San Francisco Fed's Mary Daly