MNI ASIA MARKETS ANALYSIS:Strong ISM Mfg Underscores 25Bp Hike

US TSYS: Curves Off Deeper Inversion

• Intermediate to long-end Treasury futures continue to gradually extend session lows, while yield curves bounce off deeper inversion after midday 2Y futures Block buy: 2s10s currently +1.978 at -56.670 vs. -64.490 low.
• This morning's data underscores a likely 25bp rate hike from the FOMC on Wednesday: April ISM Prices Paid climbs to 53.2, well over expected 49.0; S&P manufacturing PMI came out slightly lower than expected: 50.2 vs. 50.4 est, but gaining nonetheless vs. 49.2 in March.
• We'd caution this is a volatile series that tends to track commodity prices as much as anything - so while important, it partly reflects a bounce from the sharp drop in commodity prices last year (Prices Paid bottomed at 39.4 in Dec when the 6-month % change in raw industrials and oil prices were dropping double digits - see chart). Though clearly, we're past the lows.
• Otherwise, US markets remain generally quiet, light volumes with much of Europe out for May Day bank holiday, TYM3 just over 750k at the moment.

SHORT TERM RATES

SOFR Benchmark Settlements:

• 1M +0.01517 to 5.03387 (+.04818 total last wk)
• 3M +0.00797 to 5.08929 (+.01357 total last wk)
• 6M +0.00931 to 5.08888 (-.00877 total last wk)
• 12M +0.01696 to 4.82604 (-.07339 total last wk)

• Daily Effective Fed Funds Rate: 4.83% volume: $113B
• Daily Overnight Bank Funding Rate: 4.81% volume: $259B

• Secured Overnight Financing Rate (SOFR): 4.81%, $1.378T
• Broad General Collateral Rate (BGCR): 4.79%, $541B
• Tri-Party General Collateral Rate (TGCR): 4.79%, $530B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage falls back to $2,239.866B w/ 103 counterparties, compares to prior $2,325.479B. Compares to high usage for 2023: $2,375.171B on Friday March 31, 2023; all-time record high of $2,553.716B reached December 30, 2022.

SOFR/TREASURY OPTIONS SUMMARY

• SOFR Options:
  • Block, +10,000 SFRM3 94.68/94.75/94.81/94.87 put condors, 0.75 ref 94.855
  • +25,000 SFRM3 94.68/94.75/94.81/94.87 put condors, 0.5 ref 94.855 to -.86
  • 2,000 SFRM3 94.93/95.12 call spds ref 94.89
  • Block, +10,000 SFRZ3 96.50/97.50 call spds, 13.0 vs. 95.50/0.10%
  • +2,000 SFRM3 97.00/97.12/99.50/99.62 call condors
  • 1,000 SFRM3 94.75/95.00/95.12 broken put flys, ref 94.915
  • 2,000 SFRN3 94.50/94.93/95.00/95.18 put condors ref 95.155
• Treasury Options:
  • +4,000 USM 128 puts, 54 ref 130-02
  • 2,100 TYM3 112.25 puts, 8 ref 114-30 to -30.5
  • 2,500 FVM3 110.5/111.25 call spds ref 109-22 to -22.5
  • 2,000 FVM3 112/113 call spds, 5.5 ref 109-25.5
  • 3,000 TYM3 115.75/116.5 call spds ref 115-12

FOREX: EURJPY Prints 150.96 High, Highest Since 2008

• Moves in currency markets on Monday continue to be dominated by the Japanese Yen, comfortably the weakest performer in G10 since Friday’s BoJ Monetary Policy decision. EURJPY has extended its recent rally above the 150.00 handle with the early 150.03 session low confirming the pivot significance.
• Bear flattening in the US treasury curve, aided by some firmer US ISM data (particularly the prices paid component) is providing a positive backdrop for cross/yen and with it, EURJPY continues to register at the highest levels since 2008 after breaking above the 2014 highs last week.
• Price action has confirmed a resumption of the technical uptrend and cancels recent short-term bearish threats. The move higher signals scope for a climb towards 151.00 and 152.00, the 1.382 Fibonacci projection of the Mar 20 - 21 - Apr 6 price swing. Moving average studies remain in a bull mode position, highlighting the uptrend.
• The USD index has held a moderate upward bias on Monday, rising 0.34% as of writing and underpinned by the only notable data point on Monday. For USDJPY, 137 capped the topside for much of the session, however, price has since reached a fresh high of 137.26, further paving the way for 137.91, the Mar 8 high and a key resistance.
• The Australian dollar is the strongest performer on Monday, with a notable 1.2% advance for AUDJPY, rising to the best levels since March 7 just above the 91.00 handle. This comes in the face off some weaker China PMI data overnight, which in turn has weighed on the offshore Yuan, down 0.4% against the USD.
• Central banks in focus this week with the RBA meeting kicking the week off on Tuesday. Attention then inevitably turns to Wednesday’s FOMC decision and the ECB on Thursday, before the US employment data to finish the week.

EQUITIES: Paring Gains in Late Trade

• Stocks have trimmed second half gains, trading mildly weaker at the moment, still holding to a narrow session range. Currently, DJIA down 20.79 points (-0.06%) at 34076.09; - S&P E-Mini Future up 0.75 points (0.02%) at 4189 and Nasdaq down 15.3 points (-0.1%) at 12211.14.
• SPX futures drifted above key resistance of 4198.25 High Apr 18 earlier to 4204.00 high before retreating. A clear break of this level would confirm a resumption of the uptrend that started Mar 13 and open 4244.00, the Feb 2 high.
• On the downside, key short-term support has been defined at 4068.75, the Apr 26 low. A break would be bearish.
• Meanwhile, quarterly earnings cycle resumes after the close, salient stocks include: Stryker Corp, Community Health Systems, Invitation Homes Inc, Vornado Realty Trust, Transocean Ltd, ZoomInfo Technologies Inc, Arista Networks Inc, Avis Budget , Group Inc, SBA Communications Corp, MGM Resorts International, Credit Acceptance Corp and Diamondback Energy Inc.

COMMODITIES

• WTI Crude Oil (front-month) down $1.06 (-1.38%) at $75.71
• Gold is down $7.78 (-0.39%) at $1982.18

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
02/05/2023	2301/0001	*		UK	BRC Monthly Shop Price Index
02/05/2023	0430/1430	***		AU	RBA Rate Decision
02/05/2023	0600/0800	**		DE	Retail Sales
02/05/2023	0715/0915	**		ES	IHS Markit Manufacturing PMI (f)
02/05/2023	0745/0945	**		IT	S&P Global Manufacturing PMI (f)
02/05/2023	0750/0950	**		FR	IHS Markit Manufacturing PMI (f)
02/05/2023	0755/0955	**		DE	IHS Markit Manufacturing PMI (f)
02/05/2023	0800/1000	**		EU	M3
02/05/2023	0800/1000	**		EU	IHS Markit Manufacturing PMI (f)
02/05/2023	0830/0930	**		UK	S&P Global Manufacturing PMI (Final)
02/05/2023	0900/1100	***		EU	HICP (p)
02/05/2023	0900/1100	***		IT	HICP (p)
02/05/2023	1000/1200	**		IT	PPI
02/05/2023	1255/0855	**		US	Redbook Retail Sales Index
02/05/2023	1400/1000	**		US	Factory New Orders
02/05/2023	1400/1000	**		US	JOLTS jobs opening level
02/05/2023	1400/1000	**		US	JOLTS quits Rate
02/05/2023	-	***		US	Domestic-Made Vehicle Sales
02/05/2023	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
03/05/2023	2245/1045	***		NZ	Quarterly Labor market data
03/05/2023	2300/0900	*		AU	IHS Markit Final Australia Services PMI