MNI ASIA MARKETS ANALYSIS: JOLTs Miss Lends Further Support

US TSYS Trimming Gains Ahead ADP Private Jobs Data

• Treasury futures look to finish higher Tuesday, off session highs amid late position squaring ahead Wednesday's ADP private employment data risk, a precursor to Friday's headline employment report.
• Rates continued to extend week gains after this morning's lower than expected JOLTS Job Openings (8.059M vs. 8.350M est, 8.488M prior) -- lowest since Feb 2021. Meanwhile, Factory Orders little stronger (0.7% vs. 0.6% est, 0.8% prior rev), Ex Transportation (0.7% vs. 0.5% est, 0.4% prior rev); Durable Goods Orders in-line/firmer (0.6% vs. 0.7% est), Ex Transportation (0.4% vs. 0.4% est); Cap Goods Orders Nondef Ex Air softer (0.2% vs. 0.3% est).
• Rates had drifted higher after midday, through resistance at 110-04.5 (1.0% 10-dma envelope) to 110-05 high (+19). Sights now on 110-09, the May 16 high and bull trigger.
• Middle East tensions potential driver for the ongoing bid - but support cooled slightly after President Biden executive action to curb migrant crossings at the southern border.
• Cash yields are currently running mildly lower: 2s -.0377 at 4.7704%, 10s -.0547 at 4.3337%, 30s -.0557 at 4.4819%, while curves look mildly mixed: 2s10s -1.701 at -43.871, 5s30s +0. 058 at 12.985.
• Late year rate cut projections continue to gain vs. late Monday levels (*): June 2024 at -1.3% w/ cumulative rate cut -.3bp at 5.328%, July'24 at -16% w/ cumulative at -4.3bp at 5.288%, Sep'24 cumulative -19.3bp (-17.2bp), Nov'24 cumulative -27.8bp (-25.3bp), Dec'24 -44.3bp (-40.6bp).

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00063 to 5.32981 (+0.00203/wk)
• 3M -0.00324 to 5.34284 (-0.00004/wk)
• 6M -0.01146 to 5.31419 (-0.00215/wk)
• 12M -0.02604 to 5.20197 (+0.00168/Wk)

• Secured Overnight Financing Rate (SOFR): 5.35% (+0.01), volume: $1.912T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $781B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $764B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $93B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $275B

FED Reverse Repo Operation

• RRP usage slips to $377.825B from $387.069B prior; number of counterparties rising to 77 from 63 prior. Compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

SOFR/TEASURY OPTION SUMMARY

Interest in upside SOFR and Treasury call options continued Tuesday, underlying futures extending highs after lower than expected JOLTS Job openings. Focus on upside/rate-cut call structure targeting the September 18 FOMC rate announcement. Late year rate cut projections continue to gain vs. late Monday levels (*): June 2024 at -1.3% w/ cumulative rate cut -.3bp at 5.328%, July'24 at -16% w/ cumulative at -4.3bp at 5.288%, Sep'24 cumulative -19.3bp (-17.2bp), Nov'24 cumulative -27.8bp (-25.3bp), Dec'24 -44.3bp (-40.6bp).

• SOFR Options:
  • Block, 5,000 SFRU4/SFRZ4 94.62/94.75 put spd spds 1.5, Sep over
  • +10,000 SFRZ4 94.75 puts, 5.5 vs. 95.115/0.20%
  • +10,000 3QV4 96.50/97.00 call spds vs. 5,000 96.00 put, 8.75-10.0 ref 96.26
  • +10,000 2QU4/3QU4 96.50 call spds .25, Blue-Sep over
  • Block, +10,000 SFRZ5/SFRH6 93.75/94.25/94.75 put fly strip 9.5
  • -5,000 SFRM5 94.00/94.62 2x1 put spds 1.5 ref 95.62
  • Block, +5,000 SFRH6 93.75/94.25/94.75 put flys, 4.5
  • +3,000 SFRU4 95.00/95.75/96.50 call flys, 3.75 ref 94.87
  • Block, 10,000 SFRU4 94.75/94.87/95.00 call trees, 0.75 net/2-legs over ref 94.87
  • 10,000 SFRU4 94.93/95.06/95.18 call flys ref 94.86
  • 6,500 SFRZ4 94.75 puts, 5 ref 95.105
  • Block, 5,000 SFRH5 94.62/95.12 2x1 put spds, 9 vs. 95.30/0.05%
  • 12,000 SFRM4 95.62/96.00/96.37 call trees ref 95.56 to -.57
  • 1,500 SFRU4 94.81/94.87 put spds ref 94.86
  • 2,000 SFRZ4 96.50/97.00/97.12 broken call flys, ref 95.095
  • 2,000 SFRM4 94.18/94.75 put spds ref 94.665
  • 1,500 0QU4 96.00/96.37/96.62 call flys, ref 95.76
• Treasury Options:
  • Block, 8,500 TYU4 108/109.5 put spds, 33 vs. 110-00/0.16%
  • 6,000 USN4 115/116/117 put flys ref 118-08 to -09
  • +30,000 wk1 TY 111/111.5 call strip 5 ref 109-26/0.17%
  • -25,000 wk2 FV 106.25 calls, 33 vs. 106-15.2/0.58%
  • -15,000 wk1 TY 109.5 calls, 40-41 vs. 109-31.5/0.69%
  • 15,000 wk1 10Y 109.5 calls, 46 ref 109-30 - expire Friday
  • -10,000 FVN4 105.75/107.25 strangles, 24
  • 2,000 TYN4 108.75/109.5 2x1 put spds, 0.0-1cr/2-legs over
  • 6,500 TYN4 108.5/109.5 2x1 put spds, 5 ref 109-26
  • 3,000 TYQ4 108.5/111.5 strangles, ref 109-21
  • +30,000 TYN4 111/111.5 call strips, 21-29 ref 109-22
  • 7,000 wk1 FV 106.75/107 call spds, ref 106-11.25 expire Friday
  • 3,800 TYU4 108 puts, 39
  • 2,000 TYN4 110/110.75 1x2 call spds, 0.0 ref 109-20
  • Block, 5,000 TYN4 108.75/110.25 risk reversals, 0.0 call over ref 109-16

EGBs-GILTS CASH CLOSE: Bull Flatter With ECB Still The Focal Point

The UK and German curves bull flattened Tuesday, though yields finished off lows.

• Early weakness in oil prices and softer-than-expected Swiss CPI helped underpin Bunds and Gilts early. German labour market data came in mixed.
• Most price action of note in the European afternoon stemmed from risk-off geopolitical newsflow and a weak US job openings figure which pushed core FI futures to session highs before fading into the cash close.
• Bunds modestly outperformed Gilts out to the 10Y segment of the curve. EGB periphery spreads widened, mirroring softness in equities.
• UK PM Sunak debates Labour leader Starmer after the market close.
• Wednesday's schedule brings final Service PMI data and Eurozone PPI, with focus for the week remaining firmly on Thursday's ECB decision (MNI's preview here).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 3.5bps at 2.994%, 5-Yr is down 4.3bps at 2.576%, 10-Yr is down 4.6bps at 2.534%, and 30-Yr is down 3.7bps at 2.676%.
• UK: The 2-Yr yield is down 0.4bps at 4.353%, 5-Yr is down 3bps at 4.087%, 10-Yr is down 4.3bps at 4.178%, and 30-Yr is down 5.6bps at 4.611%.
• Italian BTP spread up 3.3bps at 133.5bps / Spanish up 2.2bps at 74.1bps

EGB Options: Mixed Rates Trade Tuesday

Tuesday's Europe rates/bond options flow included:

• SFIU4 94.85/94.80/94.75 put ladder paper paid 0.25 on 7K
• 0NM4 95.80/96.10 call spread 3k given at 1
• ERU4/Z4 96.375/96.25 put spread paper paid 1.5 on 9.5K
• ERV4 96.75/97.00 1x2 call spread paper paid 1.00 & 1.25 on 3K

FOREX Japanese Yen Extends Recovery Amid Weak US JOLTS Data

• The dovish move in Fed pricing saw a modest extension on the back of the softer-than-expected JOLTS job opening print. Upward revisions to the quits rate data helped to temporarily counter the move, however, US yields have maintained their lower trajectory throughout the session. The narrowing yield differential dynamics have specifically boosted the likes of the JPY and CHF, the clear outperformers on Tuesday.
• USDJPY trades down 0.85% around 154.80, extending an impressive move from the 157.50 highs just yesterday. The latest pullback appears to be a correction - for now. However, the pair has breached the 20-day EMA and the continuation lower has exposed key support at 154.65, the 50-day EMA, and 153.81, a trendline drawn from the Dec 28 low.
• For EURJPY, the cross sits 1.05% in the red and is heading towards key trendline support drawn from the Dec 7 ‘23 low, at 167.05. A clear breach of this line would highlight a potential reversal. Concurrently, the 50-day EMA intersects at 167.14.
• The Swiss franc shrugged off a marginally softer-than-expected core CPI print to end significantly higher on the day. SNB’s Jordan made hawkish remarks last week and the dip lower in yields has helped exacerbate the correction lower for USDCHF, an impressive 2.85% below last week’s highs.
• Sharp downward pressure on crude futures has added headwinds to the Canadian dollar, with WTI extending the week’s decline to around 5.5%. Strong support around the 1.3600 handle keeps a bull trend intact for USDCAD ahead of tomorrow’s BOC decision, where the central bank is expected to initiate monetary easing.
• With the ECB also taking place this week, we recently noted EURCAD had broken above a cluster of highs around 1.4780. Exponential moving averages are also in a bull mode position and the cross printed as high as 1.4895, a fresh 6-month high. This closely respects the downtrend line from the July 2020 highs.
• Australian GDP crosses first on Wednesday, before US ADP, the BOC and ISM Services from the US. The ECB decision on Thursday and NFP Friday remain key event risks for the remainder of the week.

FX OPTIONS: Expiries for Jun05 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0780-00(E2.2bln), $1.0835-50(E829mln), $1.0855(E1.3bln), $1.0890-00(E1.4bln), $1.0920(E1.4bln)
• USD/JPY: Y153.00-10($1.3bln), Y154.60-75($815mln), Y155.30($885mln), Y156.60-65($739mln)
• AUD/USD: $0.6585-00(A$1.5bln)
• USD/CNY: Cny7.2350($871mln), Cny7.2500($1.0bln)
   

Late Equities Roundup: Late Recovery, Extending Highs

• Stocks have bounced in late session trade, extending session highs with S&P Eminis nearing last week Wednesday levels. Little change in leading sectors compared to earlier in the session, the bounce coincided with President Biden's executive order to curb migrant crossings on the southern border. Currently, the DJIA is up 187.88 points (0.49%) at 38758.88, S&P E-Minis up 10 points (0.19%) at 5307.25, Nasdaq up 43.1 points (0.3%) at 16870.86.
• Real Estate and Consumer Staples sectors continued to lead gainers in late trade, industrial and specialized investment trusts buoyed the former: Extra Space Storage +2.81%, Camden Property Trust +2.61%, Public Storage +2.25%. Household and personal product makers supported the Consumer Staples sector: Kimberly-Clark +2.60%, Colgate-Palmolive +1.51%, Clorox +1.46%.
• Energy and Material sectors continued to underperform, oil and gas equipment and services shares weighing on the former as crude prices remained weak (WTI -0.83 at 73.39) after reports OPEC+ planned to restore output yesterday coupled with slow-down in demand. Halliburton -1.90%, Exxon Mobil -1.68%, Diamondback Energy -1.48%. Metals and mining shares weighed on Materials as gold prices fell over $24: Freeport-McMoRan -5.67%, Newmont -3.20%, Steel Dynamics -3.13%, FMC Corp -2.58%.
• Meanwhile, there are still some notable earnings releases this week: Crowdstrike and Hewlett Packard after today's close, Dollar Tree, Campbell Soup, Five Below Inc, Victoria Secret, Toro, Vail Resorts and Docusign later in the week.

E-MINI S&P TECHS: (M4) Friday’s Low Remains Intact

• RES 4: 5417.75 2.00 proj of the Apr 19 - 29 - May 2 price swing
• RES 3: 5400.00 Round number resistance
• RES 2: 5372.73 1.764 proj of the Apr 19 - 29 - May 2 price swing
• RES 1: 5368.25 High May 23 and bull trigger
• PRICE: 5309.00 @ 1445 ET Jun 4
• SUP 1: 5205.50 Low May 31 and key near-term support
• SUP 2: 5155.75 Low May 6
• SUP 3: 5099.25 Low May 3
• SUP 4: 5036.25 Low May 2

The uptrend in S&P E-Minis remains intact, however, a corrective cycle has resulted in a pullback from the recent high of 5368.25 (May 23). The latest move down resulted in a print below support at the 50-day EMA, at 5216.35 A clear break of this average would signal scope for a deeper retracement. The recovery from Friday’s low is a positive development, a continuation would open 5368.25 and a breach of this level resumes the trend.

COMMODITIES Crude Loses Further Ground, Metals Prices Drop Back

• WTI is headed for US close trading lower again today, as a continued bearish demand outlook and expectations of additional OPEC+ supplies returning from Q4 add pressure.
• WTI Jul 24 is down 1.3% at $73.3/bbl.
• For WTI futures, sights are on $71.33 next, the Feb 5 low. Initial resistance is at $76.15, the May 24 low and a recent breakout level.
• Henry Hub has tracked the easing in European gas prices to be lower on the day. A clear timeline for the Norwegian gas facility repairs has helped to ease upside pressure on European prices today.
• US Natgas Jul 24 is down 6.5% at 2.58$/mmbtu.
• Meanwhile, spot gold is down 1.0% at $2,327/oz, despite the softer US labour market data and decline in core yields.
• Silver has underperformed and has fallen by 3.9% at $29.5/oz, its lowest level since May 17. Silver is now trading within a key support zone between $30.116 - 28.494, the 20- and 50-day EMA values.
• Copper is down by 2.6% to $455/lb, leaving the red metal 12.5% below its May 20 record high. A sharp rise in inventories, with stockpiles on the Shanghai Futures Exchange at their highest since 2020, suggest that the market is sufficiently supplied.
• A clear break of support at $454.82, the 50-day EMA would suggest potential for a deeper retracement.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
05/06/2024	0130/1130	***		AU	Quarterly GDP
05/06/2024	0645/0845	*		FR	Industrial Production
05/06/2024	0900/1100	**		EU	PPI
05/06/2024	0900/1000	**		UK	Gilt Outright Auction Result
05/06/2024	1100/0700	**		US	MBA Weekly Applications Index
05/06/2024	1215/0815	***		US	ADP Employment Report
05/06/2024	1345/0945	***		CA	Bank of Canada Policy Decision
05/06/2024	1400/1000	***		US	ISM Non-Manufacturing Index
05/06/2024	1430/1030	**		US	DOE Weekly Crude Oil Stocks
05/06/2024	1430/1030			CA	BOC Governor Press Conference