MNI ASIA MARKETS ANALYSIS - RUB, Russian Stocks Dive

US TSYS SUMMARY: Closed Firmer On Geopolitical Risk

• TYH2 closed up 6+ ticks on the day at 126-28, having drifted higher over the last 40mins of trading on headlines that Putin will address the nation “soon” with plans for recognition of separatist states, raising risks of further escalation as sanctions are likely imposed.
• It earlier touched new session highs of 126-31+, briefly clearing the 20-day EMA of 126-30+ and leaving it just shy of 127-01 (Feb 7 high) after which it could open 127-24 (Feb 4 high).
• Volumes were unsurprisingly low with the US out on Presidents’ Day.
• Tomorrow: Fed's Bostic (non-voter) plus various house price indices, Markit preliminary PMIs for Feb and Conference Board consumer confidence.
• NY Fed buy-op on tap plus issuance for 13W, 26W & 52W bills and 2Y notes.

TYH2 - 10Y Note (CBT) Mar22Source: Bloomberg

EGBs-GILTS CASH CLOSE: BTP Spreads Wider On Risk-Off Move

Core European FI yields rose while periphery spreads widened Monday, in a volume-thinned session due to the US market holiday.

• German and UK yields looked set for another Ukraine-Russia induced drop, but rebounded cautiously in early afternoon as markets again weighed potential for de-escalation.
• Earlier, strong flash PMI data across Europe had pushed yields higher (and probably kept a floor on the intraday rally).
• The big mover was BTP: spreads continued their steady rise from Friday morning on the broader risk-off move (Eurostoxx futures hit lowest since Oct 2021).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.4bps at -0.454%, 5-Yr is up 2.5bps at -0.048%, 10-Yr is up 1.4bps at 0.206%, and 30-Yr is up 0.3bps at 0.474%.
• UK: The 2-Yr yield is up 1.9bps at 1.284%, 5-Yr is up 2.1bps at 1.302%, 10-Yr is up 3bps at 1.408%, and 30-Yr is up 2.6bps at 1.492%.
• Italian BTP spread up 5.8bps at 170.5bps / Spanish up 2.6bps at 103.7bps

EUROPE OPTION FLOW SUMMARY: Schatz And Bobl Puts Feature

Monday's Europe rates / bond options flow included:

• OEJ2 131/130 1x1.5 put spread bought for 18/19 in 10k
• OEJ2 137 call bought for 2 in 5k (well OTM)
• OEJ2 130.75/130.25ps, bought for 12.5 in 1.5k
• DUJ2 111.30/111.10/111.00p fly, bought for 4 in 2k
• DUJ2 111.20/111/110.80p fly, bought for 2.5 in 3k
• DUJ2 111.20/10/00/110.90p condor, bought 1.5 in 8.5k

FOREX: USDRUB Breaches 80.00 As Geopolitical Tensions Significantly Rise

• Despite US market closures due to the President’s Day holiday, markets have had a volatile start to the week as Russia headlines were once again in focus.
• Russian President Vladimir Putin has spoken on Russian television outlining the historical justification for today's recognition of the breakaway republics in Donbas. Prior to and throughout, USDRUB has had a steep upward trend on Monday rising from 76.15 lows all the way to a peak of 80.2589 as of writing.
• In turn, global equity index futures suffered throughout the latter half of the trading day which prompted a recovery in broad dollar indices, despite relatively narrow ranges.
• There was a very strong RUB bounce following the end of the Putin address with potential profit taking/liquidity in play given the US holiday. USDRUB fell back below 79.00, however, now resides around 79.42, up 2.5% for the session.
• Most notable move in G10 FX was relative strength of the Swiss Franc. The souring risk sentiment bolstered CHF with both EURCHF and USDCHF falling over 0.6%.
• EUR/CHF stumbled through both the 50-dma at 1.0429 as well as Friday's 1.0426 low. This marks the fourth consecutive session of lower lows in EUR/CHF and losses were exacerbated through the Feb lows at 1.0383 marking a bearish development with 1.03 the most notable support/target below.
• RBA Assist Gov Kent Speaks overnight before German IFO data headlines the European data docket. There may also be comments from BOE MPC Member Ramsden, however the more notable event will be left on Wednesday with the February RBNZ decision/statement.

EUR/CHF Remains a Risk-On/Risk-Off Cross of Choice

• EUR/CHF trades lower Monday, with the cross showing through both the 50-dma at 1.0429 as well as Friday's 1.0426 low. This marks the fourth consecutive session of lower lows in EUR/CHF and narrows the gap with 1.0383. A slip through here would erase the rally posted from February 3rd and would mark a bearish development.
• Today's pullback continues to show the cross being driven by over-arching market sentiment and the inputs from geopolitics - particularly in Eastern Europe and Ukraine.
• A trading strategy structured around the Fear and Greed Index remains the most profitable strategy for the cross over the past 12 months. The strategy currently recommends a winning short signal initiated on February 17th as the Fear and Greed Index hits the lowest levels since mid-January.

FX OPTIONS: Expiries for Feb22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1300-05(E788mln), $1.1330-35(E998mln), $1.1350-60(E817mln), $1.1400(E614mln)
• USD/JPY: Y115.20-25($1.8bln)
• EUR/JPY: Y115.20-25($1.3bln)
• AUD/USD: $0.7200(A$1.6bln), $0.7300(A$805mln)
• USD/CAD: C$1.2600-10($1.1bln), C$1.2700($1.2bln), C$1.2800($747mln)
• USD/CNY: Cny6.3600($700mln)

COMMODITIES: Brent Close To Testing Bull Trigger

• Oil prices are up strongly again with a combination of signs of demand rising and continued Russia-Ukraine tensions, exacerbated by Putin’s decision to recognise the separatist states.
• WTI is +3.2% at $93.95 as it moves back towards short-term support of $95.82 (Feb 14 high) whilst support is materially lower at $88.41 (Feb 9 low and key short-term).
• Brent is +2.9% at $96.22 having touched $96.75, very close to the bull trigger of $96.78 (Feb 14 high) after which it could open $97.36 (2.618 proj of the Dec 2-9-20 price swing).
• The most active strikes in the Apr22 contract have been in $100/bbl calls, $98/bbl calls and $90/bbl puts.
• Gold is once again supported, up 0.3% at $1904.2 but down from the earlier intraday high of $1908.3, and next eyes key resistance of $1916.6 (Jun 1, 2021 high)

Brent 1st FutureSource: Bloomberg