MNI ASIA MARKETS ANALYSIS: More Disinflationary Measures

US TSYS Drop in Jobs Opening JOLTS Markets

• Active session Tuesday as Tsy futures gapped higher after lower than expected JOLTS Job Openings (8.733M vs. 9.3M est, 9.350M prior down-revised from 9.553M) - the biggest monthly drop since May 2023 and marks the lowest level of job openings since March 2021, with the ratio of openings/unemployed dropping to 1.34, the lowest since Aug 2021.
• Underlying futures rallied back to early September levels following lower than expected JOLTS data while markets reprice 2024 rate cut projections: December steady at -.3bp at 5.333%, January 2024 cumulative -3.8bp at 5.298%, March 2024 chance of rate cut climbs to -60.0% (vs. -55.2% this morning) with cumulative at -18.8bp at 5.148%, May 2024 pricing in -72.4% (-71.2% this morning) with cumulative -36.9bp at 4.967%. Fed terminal at 5.33% in Feb'24.
• Additional data saw less of a reaction: ISM Services Index higher than est (52.7 vs. 52.3, 51.8 prior), Prices Paid (58.3 vs. 58.0 est, 58.6 prior), Employment lower (50.7 vs. 51.4 est, 50.2 prior), New Orders higher (55.5 vs. 54.9 est, 55.5 prior). Tsy futures pared support briefly after in-line S&P Global US Services PMI (50.8 vs. 50.8 est, 50.8 prior); S&P Global US Composite PMI (50.7 vs. 50.7 est, 50.7 prior).
• Wednesday Data Calendar: ADP, Nonfarm Productivity, Unit Labor Cost. Main focus still on Friday's employment data for November.

FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.01374 to 5.35961 (+0.01295/wk)
• 3M +0.01326 to 5.37623 (+0.00100/wk)
• 6M +0.01407 to 5.31665 (-0.02425/Wk)
• 12M +0.01183 to 5.05096 (-0.06745/wk)

• Secured Overnight Financing Rate (SOFR): 5.37% (-0.02), volume: $1.631T
• Broad General Collateral Rate (BGCR): 5.31% (+0.00), volume: $618B
• Tri-Party General Collateral Rate (TGCR): 5.31% (+0.00), volume: $602B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $103B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $255B

REVERSE REPO OPERATION

The NY Fed Reverse Repo operation usage rebounds to $834.428B w/ 82 counterparties vs. $815.847B yesterday. Operation usage fell to the lowest level since early July 2021 of $768.543B on December 1. Usage fell below $1T for the first time since August 2021 last on November 9 ($993.314B).

SOFR/TREASURY OPTION SUMMARY

• SOFR Options:
  • +15,000 SFRH4 95.75 calls, 4.75
  • +15,000 2QM4/3QM4 97.00/98.50 call spd spd 3.5-4.0
  • +10,000 SFRH4 96.00 calls, 3.75
  • 4,000 SFRG4 95.18/95.25 call spds ref 94.875
  • 2,000 SFRF4 94.68 puts ref 94.87
  • Block, 4,000 SFRF4 94.62/94.75 put spds, 2.0 vs. 94.87/0.17%
  • 1,750 SFRF4 94.75/95.00/95.12 1x3x2 broken call fly ref 94.875
  • 2,500 SFRM4 96.00/97.00 call spds ref 95.24
  • Block, 2,500 0QG4 97.00/97.25 call spds, 3.0 vs. 96.185/0.05%
  • 1,100 SFRF4/SFRG4 94.62/94.68/94.75 call fly spd
  • 2,000 SFRZ3 94.56/94.62/94.68 call flys ref 94.6225
  • Block, 2,500 SFRM4 94.50/94.75 put spds vs. SFRM4 95.62/95.87 call spds ref 95.245
  • 1,200 SFRH4 94.87/95.87 2x3 call spds ref 94.875
  • 2,500 0QZ3 96.37/97.00 call spds ref 95.965
  • 1,300 SFRG4 94.56/94.62/94.75 broken put fly ref 94.8985
  • 2,000 SFRH4 94.43/94.75/94.87 broken put fly vs. SFRZ3 94.62 straddle
• Treasury Options:
  • 2,000 TYH4 107.5/108.5/110.5/111.5 put condors, 33 ref 110-28
  • 2,400 TYF4 110 puts, 32 ref 110-26.5, total volume over 8.2k
  • +7,000 TYH4 113.5 calls, 46 ref 110-29
  • +5,000 USG4 108/110/112/114 put condors, 15 ref 119-00
  • 2,500 USF4 114/116 put spds, 16 ref 119-07
  • 1,200 USF4 121 calls, 47 ref 119-00 total volume over 6.9k
  • 2,500 TYG4 108/109.5 2x1 put spds ref 110-19
  • Update, appr +25,000 Wed wkly 10Y 109/109.5/110 put trees, 3
  • 7,100 wk3 10Y 108.5/109 put spds, ref 110-21.5
  • 3,000 TYF4 109.5 puts 5 over TYF4 110.75/111.75 call spds ref 110-19.5
  • 1,760 TUF4 102/102.25 3x2 put spds ref 102-13.12
  • -4,500 USF4 116/121 call spds, 228 vs. 118-17/0.48%
  • 1.000 FVF4 107.5 calls, 33 ref 107-09
  • 2,000 TYF4 106.5/107.5/108.5 put flys
  • 2,000 TYG4 107.5/110 2x1 put spds ref 110-13.5

EGBs-GILTS CASH CLOSE: Dovish Schnabel Reloads The Rally

The German and UK curves bull flattened sharply Tuesday as the overall fixed income rally continued.

• The main catalyst for lower yields was an interview published overnight with ECB's Schnabel who showed surprising confidence on the inflation front ("the recent inflation print has given me more confidence that we will be able to come back to 2% no later than 2025"), translating to making further hikes "rather unlikely" - and when specifically asked about a rate-cut before mid-2024, she did not rule it out.
• The bond rally extended in the afternoon as US job openings data came in much softer than expected. Softer oil prices also helped.
• Gilts outperformed Bunds, with UK yields down double digits across the curve.
• Periphery EGBs saw spreads tighten, shrugging off Schnabel's comments that echoed Pres Lagarde's on PEPP reinvestments being re-assessed sooner rather than later.
• Attention early Wednesday will be on German factory orders for October.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 8.5bps at 2.61%, 5-Yr is down 8.5bps at 2.19%, 10-Yr is down 10.7bps at 2.247%, and 30-Yr is down 14.2bps at 2.448%.
• UK: The 2-Yr yield is down 10.4bps at 4.514%, 5-Yr is down 13bps at 4.056%, 10-Yr is down 16.9bps at 4.025%, and 30-Yr is down 15.7bps at 4.567%.
• Italian BTP spread down 3.1bps at 174.1bps / Greek down 4.2bps at 115.8bps

EGB Options: Large Euro Rate Structures Tuesday, Mostly Leaning Downside

Tuesday's Europe rates / bond options flow included:

• DUH4 106.50/107.00/107.20 broken c fly, sold at 9 in 5k
• ERG4 96.25/96.12/96.00p fly 1x3x2, bought for 2 in 4k
• ERH4 96.37/96.50cs vs 96.25/96.12ps, bought the cs for 1.25 in 8k
• ERH4 96.25/96.12/96.00p ladder 1x1x2, sold at 1 in 10k
• ERH4 96.125/96.00 1x2 put spread bought for 0.5 in 20k
• ERU4 97.00^ sold at 72.5 in 2k
• ERH4 96.00/96.12/96.25c fly sold at 3 in ~30k
• 0RZ3 98.00c, sold at 1 in 15k

FOREX Greenback Extends Recovery, AUDUSD Sinks Post-RBA

• The greenback extended on its most recent recovery on Tuesday, shrugging off the weaker-than-expected US JOLTS data. Further weakness for the Euro amid some dovish ECB speak underpinned the 0.4% rally for the USD index.
• With the greenback bid extending in late US trade, EURUSD slid back below 1.0800 for the first time since US inflation data was released on November 14. With the EURUSD trend outlook remaining bullish for now, recent weakness appears to be a correction. Note that the trend condition is overbought, and the move lower is allowing this set-up to unwind. Support to watch is 1.0770, the 50-day EMA and 1.0756, the Nov 6 high.
• The Australian dollar is the weakest performer in the G-10 space. AUD/USD was pressured in early APAC trade as regional equities ticked lower before extending losses as the RBA held rates steady and noted that inflation is continuing to moderate. AUD/USD is down 1.00% heading into the Wednesday crossover and price has narrowed in on initial support at the 20-Day EMA (0.6539), before pivot support at 0.6522.
• There was some volatile price action around the US data, most notable in USDJPY which saw a quick blip lower of around 65 pips to 146.57 lows. However, this proved to be short-lived and the pair had an impressive bounce to eventually trade at a fresh session high of 147.39. On the topside, yesterday’s highs at 147.45 represent a short-term target, however, more notable key short-term resistance does not come in to play until 148.51, the Nov 30 high.
• Australian GDP will cross overnight before the UK construction PMI and potential comments from Governor Bailey. US ADP employment will play second fiddle to the Bank of Canada rate decision. Remarks from Gov. Macklem two weeks ago could heavily dictate the message we receive from the single page statement, including that excess demand is now gone and policy may now be restrictive enough.

Late Equity Roundup: Inside Range, IT Outperforming

• Stocks hold mixed, off lows following this morning's weaker than expected JOLTS job openings data that rekindled projections of a rate cut in early 2024. At the moment, DJIA is down 77.91 points (-0.22%) at 36125.11, S&P E-Mini futures down 3 points (-0.07%) at 4573.25 while the Nasdaq is up 29.3 points (0.2%) at 14214.09.
• Leading gainers: Information Technology and Consumer Discretionary sectors outperformed, hardware and storage makers buoyed the former: Apple +1.86%, MSI and Keysight Technology both +0.10%. Auto-makers continued to support the Consumer Discretionary sector with Tesla +1.23%, GM -0.51%.
• Laggers: Materials and Energy sectors underperformed, metals/mining shares weighing on the former: Freeport-McMoRan -2.49%, Steel Dynamics -1.39%, Newmont Mining -1.31%. Meanwhile, energy and equipment stocks traded weaker: Baker Hughes -2.84%, Haliburton -2.57%, Schlumberger -2.52%.
• A bullish theme in S&P e-minis remains intact and last Friday’s push higher is a positive development. The contract is trading closer to its recent highs and so far, corrections have been shallow. Note too that moving average studies are in a bull-mode position and this highlights positive market sentiment. A resumption of gains would signal scope for a climb towards 4690.75, the Aug 2 high. Initial support lies at 4596.86, the 20-day EMA.

E-MINI S&P TECHS: (H4) Corrective Pullback

• RES 4: 4738.50 High Jul 27 and a key resistance
• RES 3: 4700.00 Round number resistance
• RES 2: 4690.75 High Aug 2
• RES 1: 4657.75 High Dec 4
• PRICE: 4559.50 @ 14:28 GMT Dec 5
• SUP 1: 4596.86 20-day EMA
• SUP 2: 4442.65 50-day EMA
• SUP 3: 4402.00 Low Nov 10
• SUP 4: 4373.75 Low Nov 3

A bullish theme in S&P e-minis remains intact and last Friday’s push higher is a positive development. The contract is trading closer to its recent highs and so far, corrections have been shallow. Note too that moving average studies are in a bull-mode position and this highlights positive market sentiment. A resumption of gains would signal scope for a climb towards 4690.75, the Aug 2 high. Initial support lies at 4596.86, the 20-day EMA.

COMMODITIES WTI Futures Hover Around Bear Trigger, Trend Outlook Remains Unchanged

• Following a volatile session, Crude futures are now trading down on the day, with the stronger US dollar and concerns on the demand outlook weighing against remarks from Russian officials that OPEC+ was prepared to deepen cuts in Q1. Russia’s Deputy PM said that OPEC+ was ready for further cuts in Q1, in line with the Saudi Energy Minister’s comments yesterday.
• The trend outlook for WTI futures is unchanged, it remains bearish and the move lower from last Thursday’s high, reinforces this set-up. On the downside, sights are on the bear trigger at $72.37, the Nov 16 low which was briefly pierced today. Clearance of this level would confirm a resumption of the downtrend and would target $70.96, a Fibonacci retracement point.
• The firmer dollar also weighed on precious metals with spot gold extending the pullback from Monday’s fresh all-time highs. While the overall price action signals potential for a climb towards 2177.58 next, a Fibonacci projection, price action conveys a short-term pullback, which should be considered corrective - for now. Initial support is $2004.1, the 20-day EMA.
• A similar story for silver, falling 1.4% on Tuesday, which appears to be unwinding an overbought condition. The next two key support levels to watch lie at $24.064 and $23.480, the 20- and 50-day EMAs.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
06/12/2023	0030/1130	***		AU	Quarterly GDP
06/12/2023	0700/0800	**		DE	Manufacturing Orders
06/12/2023	0830/0930	**		EU	IHS Markit Final Eurozone Construction PMI
06/12/2023	0930/0930	**		UK	IHS Markit/CIPS Construction PMI
06/12/2023	1000/1100	**		EU	Retail Sales
06/12/2023	1030/1030			UK	BOE FPC Summary and Record
06/12/2023	1200/0700	**		US	MBA Weekly Applications Index
06/12/2023	1315/0815	***		US	ADP Employment Report
06/12/2023	1330/0830	**		CA	International Merchandise Trade (Trade Balance)
06/12/2023	1330/0830	**		US	Trade Balance
06/12/2023	1330/0830	**		US	Non-Farm Productivity (f)
06/12/2023	1500/1000	***		CA	Bank of Canada Policy Decision
06/12/2023	1500/1000	*		CA	Ivey PMI
06/12/2023	1530/1030	**		US	DOE Weekly Crude Oil Stocks