MNI ASIA MARKETS ANALYSIS: Month End Tempers Dovish Data Rect

US TSYS Month/Quarter-End Positioning Outweighs Dovish Data React

• It appeared month/quarter-end positioning outweighed Friday's dovish reaction to Core PCE inflation that was on balance a little softer than expected in May, printing 0.08% M/M vs consensus of 0.1% that had tilted higher with an average unrounded 0.13% M/M.
• Treasury futures tracked higher after UofM Inflation expectations were revised lower: 1Y inflation expectations: 3.0% (cons 3.2, prelim 3.3) in June final after 3.3% in May; 5-10Y expectations: 3.0% (cons 3.1, prelim 3.1) in June after 3.0% in May.
• Support was short lived, however, as rates as well as equities reversed course, extended lows heading into the London close. No obvious headline driver, trading desks widely cited month end, positioning squaring ahead of the first round of French elections (June 29-30).
• Treasury futures extended lows: TYU4 taps 109-27 (-13) with attention on a firm short-term support at 109-26+, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement, towards 109-00+, the Jun 10 low.
• Curves bear steepening: 2s10s +5.384 at -37.376 (lest inverted since the beginning of the month), 5s30s +4.490 at 17.151.
• In-line with the steepening, projected rate cut pricing through year end looks steady to mildly higher vs. pre-data levels (*): July'24 at -10% w/ cumulative at -2.5bp at 5.302%, Sep'24 cumulative -18.6bp (-17.5bp), Nov'24 cumulative -27.6bp (-26.6bp), Dec'24 -47.3bp (-45.3bp).
• Look ahead: shortened Fourth of July holiday week next week, FOMC minutes on Wednesday, Thursday closed, June employment data next Friday.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00587 to 5.33717 (-0.00806/wk)
• 3M -0.00696 to 5.32460 (-0.01795/wk)
• 6M -0.00824 to 5.25471 (-0.02087/wk)
• 12M -0.01449 to 5.04004 (-0.01161/wk)

• Secured Overnight Financing Rate (SOFR): 5.34% (+0.00), volume: $1.888T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $732B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $719B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $83B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $244B

FED Reverse Repo Operation - Usage Surge Over $600M

• Month/quarter end sees RRP usage surge over $600B to $664.570B (highest level since January 10) vs. $531.692B Thursday; number of counterparties jumps to 93 from 75 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

SOFR/TEASURY OPTION SUMMARY

SOFR options remained mixed in late Friday trade while Treasury options saq some chunky downside put and put spread buying in 10s and 30s as underlying futures extended lows in late trade. Projected rate cut pricing through year end running steady to mildly higher vs. pre-data levels (*): July'24 at -10% w/ cumulative at -2.5bp at 5.302%, Sep'24 cumulative -18.6bp (-17.5bp), Nov'24 cumulative -27.6bp (-26.6bp), Dec'24 -47.3bp (-45.3bp). Salient flow includes:

• SOFR Options:
  • +5,000 SFRU4 94.81/94.87/94.93/95.00 call condors, 2.75 vs. 94.88/0.05%
  • +5,000 SFRU4 95.75/97.00 call spds, 0.75
  • +5,000 SFRQ4 94.87 puts, 7.0
  • +5,000 0QU4 96.25 calls, 11.0 vs. 95.92/0.28%
  • Block, 3,500 SFRU4 94.62/94.68 put spds vs. SFRN4 94.62/94.68 put spds x2, 0.5 net
  • 2,000 SFRU4 94.81/94.87/94.93/95.00 call condors, ref 94.85
  • 4,000 SFRQ4 94.68/94.75/94.87 put trees ref 94.845
  • 2,500 SFRZ4 95.75/96.00/96.25/96.50 call condors, ref 95.135
• Treasury Options:
  • 25,000 TYU4 109 puts, 42 on screen a couple seconds later
  • Block, 13,000 TYU4 108.5/109 put spds, 10 vs. 109-29/0.33%
  • Over 10,000 USQ4 112/114 put spds, 9 ref 118-12
  • +7,500 TYU4 110 straddles, 205-208
  • 2,500 TYQ4 109/109.5 put spds, 14 ref 110-15
  • 4,200 TYQ4 106 puts, 1 ref 110-05 to -05.5
  • Over 15,700 wk4 TY 110.5 calls, 2 ref 110-05 (expire today)
  • Over 11,000 TYQ4 109 puts, 19-17, 17 last ref 110-16
  • 1,500 FVQ 107/108/108.5 broken call flys ref 106-20.25
  • 2,000 TYU4 108/112 strangles, ref 110-03.5

EGBs-GILTS CASH CLOSE: OAT Spreads Off Wides Ahead Of French Elections

European curves continued to steepen Friday, with Gilts outperforming Bunds.

• Bunds and Gilts rallied sharply in early afternoon on benign US PCE inflation data, but weakness resumed heading to the European cash close and the month and quarter-end.
• June flash inflation data for France/Spain/Italy was in line, spurring limited market reaction.
• The UK curve twist steepened, with Germany's bear steepening.
• 10Y OAT/Bund spreads came off Thursday's 12-year wide close and an intraday level near 85bp to close at 80bp ahead of the weekend's first round of French legislative elections.
• Periphery spreads closed mixed, with BTPs outperforming.
• Beyond the weekend's French elections (MNI preview here), next week's schedule includes German and Eurozone flash inflation, the ECB's Sintra forum, and the UK election.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.6bps at 2.833%, 5-Yr is up 4bps at 2.482%, 10-Yr is up 5.2bps at 2.5%, and 30-Yr is up 5.5bps at 2.691%.
• UK: The 2-Yr yield is down 1.5bps at 4.221%, 5-Yr is up 1.3bps at 4.024%, 10-Yr is up 4.2bps at 4.172%, and 30-Yr is up 4.9bps at 4.659%.
• Italian BTP spread down 0.5bps at 157.2bps / Spanish up 1.3bps at 91.9bps

FOREX: USD Index Little Changed Following US PCE, AUDJPY Rises 0.45%

• Overall, currency adjustments in G10 have remained limited, owing to the two-way price action following US PCE and the subdued risk appetite as markets assess the upcoming risks associated with this weekend’s French election. 
• Slightly softer PCE data saw treasury yields decline across the curve, initially weighing on the dollar and boosting the Japanese yen. USDJPY sunk as low as 160.26 following the release, from overnight and cycle highs of 161.27.
• However, US yields rapidly reversed higher and as such the Yen came back under pressure, a dynamic that appeared to build momentum into the month-end WMR fix. EURJPY rallied as much as 100 pips in the two hours preceding the fixing window and AUDJPY remains as one of the best performing crosses on the day, up 0.45% and extending above 107.00.
• EURUSD remains in consolidation mode, holding a narrow 37 pip range as markets weigh the risks of holding positions into the first round of French legislative elections this weekend. The trend outlook is bearish and short-term gains are considered corrective. Moving average studies have crossed and are in a bear-mode set-up highlighting a downtrend. 1.0675, 76.4% of the Apr 16 - Jun 4 bull leg, was recently pierced and a clear break of this level would signal scope for a move towards 1.0601 Low Apr 16 and a key support. Initial firm resistance is 1.0775, the 50-day EMA.
• French elections and China PMIs kick things off next week, with German inflation data and US ISM Manufacturing PMI also scheduled for Monday.

FX OPTIONS: Expiries for Jul01 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0675-85(E580mln), $1.0695-00(E2.4bln)
• USD/JPY: Y159.50($908mln)
   

Late Equities Roundup: Weaker On Month/Quarter End After Cycle Highs

• Stocks are mildly weaker in late Friday trade, well off this morning's new or nearly new cycle highs heading into month/quarter-end positioning that can trigger wild moves in thin trade ahead of the weekend.
• SPX Eminis were a couple points shy of the all time high of 5588.00 from June 20, Nasdaq marked a new all-time high of 18,029.26, while DJIA climbed to 39,436.89 -- still well off mid-May high of 40,003.59. Currently, the DJIA is down 125.74 points (-0.32%) at 39037.43, S&P E-Minis down 12 points (-0.22%) at 5533.75, Nasdaq down 29.9 points (-0.2%) at 17828.8.
• Information technology and Financial sectors continued to outperform in late trade, semiconductor makers supporting the former: Qorvo +2.83%, Qualcomm +2.20%, Applied Materials +2.04%, Microchip Technology +1.91%.
• Regional banks buoyed the Financial sector: Regions Financial +4.27%, Citizens Financial +3.64%, Key Bank +3.23%.
• Meanwhile, Utilities and Consumer Discretionary sectors continued to underperform in late trade, independent power and electricity providers weighing on the former: AES -9.01%, NextEra Energy -4.69%, Constellation Energy -1.36%.
• Athletic apparel makers weighed on Consumer Discretionary: namely Nike -20.11% after poor sales guidance and easing market share. Meanwhile Lululemon Athletica -3.29%.
• Reminder, the week after next kicks off the latest equity earnings cycle.

E-MINI S&P TECHS: (U4) Trend Signals Point North

• RES 4: 5622.69 2.764 proj of the Apr 19 - 29 - May 2 price swing
• RES 3: 5600.00 Round number resistance
• RES 2: 5594.66 2.618 proj of the Apr 19 - 29 - May 2 price swing
• RES 1: 5588.00 High Jun 20
• PRICE: 5531.00 @ 1500 ET Jun 28
• SUP 1: 5480.29/5386.53 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 is unchanged and signals remain bullish with price trading closer to its recent highs. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This confirmed a resumption of the uptrend. Note that moving average studies are in a bull-mode position, highlighting positive sentiment. Sights are on 5594.66, a Fibonacci projection. Support to watch is 5480.29, the 20-day EMA.

COMMODITIES WTI Crude Edges Down, Copper Pares Gains Amidst Recovery In Chile Production

• Crude has fallen back today but is within the current three-day range. Oil has struggled for clear direction this week, although WTI is still on track for a 1.0% rise.
• WTI Aug 24 is down by 0.2% on Friday at $81.6/bbl.
• Meanwhile, spot gold is broadly unchanged at $2,328/oz today, leaving it marginally higher on the week.
• A bear threat in gold remains present and the yellow metal continues to trade closer to its recent lows.
• A clear break of the 50-day EMA, at $2,318.4, would open $2,277.4, the May 3 low. Initial firm resistance is $2,387.8, the Jun 7 high.
• Silver has pared gains following this afternoon’s US PCE data, leaving it up by 0.8% at $29.2/oz.
• Support in silver at $28.659, the Jun 13 low and bear trigger, was pierced this week. A clear break of it would strengthen a bearish theme and open $27.971, the May 13 low. First resistance to watch is $30.853, the Jun 21 high.
• Copper has also pared gains from its intra-day high of $442.8/lb, and is currently 1.1% higher on the day, at $439.6/lb.
• In Chile, the world’s largest supplier of the red metal, data today showed that copper production was up 8.1% y/y in May, reaching its highest level this year. The government is looking for a 5% increase in output this year amidst on-going mine expansion.

MONDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
01/07/2024	2300/0900	**		AU	S&P Global Manufacturing PMI (f)
01/07/2024	2350/0850	***		JP	Tankan
01/07/2024	0030/0930	**		JP	S&P Global Final Japan Manufacturing PMI
01/07/2024	0130/1130	**		AU	Retail Trade
01/07/2024	0145/0945	**		CN	S&P Global Final China Manufacturing PMI
01/07/2024	0630/0830	**		CH	Retail Sales
01/07/2024	0715/0915	**		ES	S&P Global Manufacturing PMI (f)
01/07/2024	0745/0945	**		IT	S&P Global Manufacturing PMI (f)
01/07/2024	0750/0950	**		FR	S&P Global Manufacturing PMI (f)
01/07/2024	0755/0955	**		DE	S&P Global Manufacturing PMI (f)
01/07/2024	0800/1000	***		DE	North Rhine Westphalia CPI
01/07/2024	0800/1000	***		DE	Bavaria CPI
01/07/2024	0800/1000	**		EU	S&P Global Manufacturing PMI (f)
01/07/2024	0830/0930	**		UK	BOE M4
01/07/2024	0830/0930	**		UK	BOE Lending to Individuals
01/07/2024	0830/0930	**		UK	S&P Global Manufacturing PMI (Final)
01/07/2024	1200/1400	***		DE	HICP (p)
01/07/2024	1345/0945	***		US	S&P Global Manufacturing Index (final)
01/07/2024	1400/1000	***		US	ISM Manufacturing Index
01/07/2024	1400/1000	*		US	Construction Spending
01/07/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
01/07/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
01/07/2024	1900/2100			EU	ECB's Lagarde speech at ECB forum on Central Banking