MNI ASIA MARKETS ANALYSIS: Tsy Raises Q4 Borrow Cost $150B

HIGHLIGHTS

• US Treasury Raises Q4 Borrowing Estimate By USD150B
• BIDEN TO FLOAT WINDFALL TAX ON ENERGY PRODUCERS: AP
• OPEC RAISES 2023, MEDIUM-TERM AND 2045 OIL DEMAND FORECASTS, '22 WORLD OIL OUTLOOK, Rtrs

USX TSY: Late Session Volatility: What Sell-Off?

Tsy futures gapped higher (30YY 4.1436%) in the last few minutes -- likely month-end buying hitting an air pocket after Tsys gapped lower following the Tsy dept annc raising Q4 borrowing by $150B.

• Bonds had gapped lower right on the bell (30YY climbs to 4.2274% high), yield curves off lows after the US Tsy announced its current estimates of privately-held net marketable borrowing for the October – December 2022 and January – March 2023 quarters.
• During the October – December 2022 quarter, Treasury expects to borrow $550 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $700 billion. The borrowing estimate is $150 billion higher than announced in August 2022, primarily due to changes to projections of fiscal activity, greater than projected discount on marketable securities, and lower non-marketable financing. Tsy Quarterly Refunding release Wed morning at 0830ET.
• Tue's ISMs likely to draw same muted reaction ahead Wed's FOMC policy announcement with 75bp expected, as much focus on year end guidance as current annc: step-down to a 50bp hike at the following meeting looks like the path of least resistance for now – the question is, how strongly does the FOMC seek to express that view. Employment data: ADP private jobs data early Wed (0815ET) followed by October read for NFP this Fri at 0830ET.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00072 to 3.06314% (-0.01786 total last wk)
• 1M +0.03715 to 3.80486% (+0.18214 total last wk)
• 3M +0.02072 to 4.46029% (+0.08114 total last wk) * / **
• 6M -0.01500 to 4.91586% (+0.05586 total last wk)
• 12M +0.07929 to 5.44829% (-0.10657 total last wk)
• * Record Low 0.11413% on 9/12/21; ** New 14Y high: 4.46029% on 10/31/22

• Daily Effective Fed Funds Rate: 3.08% volume: $107B
• Daily Overnight Bank Funding Rate: 3.07% volume: $300B

• Secured Overnight Financing Rate (SOFR): 3.05%, $951B
• Broad General Collateral Rate (BGCR): 3.00%, $397B
• Tri-Party General Collateral Rate (TGCR): 3.00%, $384B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $2,275.459B w/ 112 counterparties vs. $2,183.290B in the prior session. Prior record high stands at $2,425.910B on Friday, September 30.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• SOFR Options:
  • Block, 5,500 SFRZ4 (long Green Dec) 99.50/100 1x2 call spds, .5 net ref 96.19
  • +10,000 SFRZ2 95.50/95.62/95.87 call trees, 1.75 ref 95.39
  • Block, +2,500 SFRG3 95.18/95.37 call spds, 6.5 vs. 95.085/0.12%
  • Block, +21,050 short Dec 95.00 puts, 9.5 ref 95.48
  • +15,000 short Dec 95.12 puts, 12.0 vs. 95.48/0.28%
  • Block, 2,500 STIR 95.00/95.25/95.37/95.50 broken put condors, 6.0 vs. 95.445/0.05%
  • +20,000 SFRF3 95.18/95.37/95.50/95.62 call condors, 2.0
  • +2,000 short Nov 94.87/95.00/95.12/95.12/95.25 put
  • Block, 10,000 SFRM3 95.62/95.75/96.00 put flys, 10.5 net ref 95.125
  • Over 9,900 Green Nov 96.56 calls
  • Blocks, total 8,500 SFRH3 95.50/95.62 put spds, 10.0 vs. 95.065-.055/0.05%
  • 1,500 SFRM3 95.00/95.37/95.75 call flys
• Eurodollar Options:
  • 30,000 Dec 97.37/99.37 put spds, 200.0
  • -2,000 Mar 95.37/95.50 call strips, 14.5 vs. 94.78/0.38%
  • +6,000 Sep 95.25 calls, 41.5 vs. 95.02-.015/0.40%
  • 6,000 Dec 94.62/94.75 put spds
• Treasury Options:
  • -2,000 TYZ2 110 puts, 51 ref 110-23.5/0.40%
  • 10,000 FVZ 106 puts, 31.5 ref 106-19.5
  • 3,600 TYZ 117/119 call spds
  • 4,400 wk2 FV 108/108.75/109.25 call flys
  • over 23,600 TYZ 112.75 calls, 22 after earlier block
  • Blocks, total 10,000 TYZ 112.75 calls, 22-20
  • Block, 5,000 TYZ 113.5 calls, 16

EGBs-GILTS CASH CLOSE: BoE Week Starts With UK Short End Underperformance

Stronger-than-expected Eurozone flash inflation sparked a further round of EGB weakness, though Schatz managed to outperform their UK counterparts amid a short-end pre-BoE Gilt selloff.

• EGB weakness continued as last week's dovish ECB narrative is reassessed (particularly in light of the above-expected 10.7% Y/Y rise in EZ CPI, alongside stonger-than-expected Q3 GDP prints).
• Bunds have nearly retraced the entire post-ECB rally, with bear steepening seen today.
• But the UK curve bear flattened as terminal UK rate pricing edged higher with an eye on Thursday's BoE decision, and amid hawkish repricing of central banks elsewhere (including the Fed whose decision is Wednesday).
• Peripheries underperformed, with BTP spreads widening nearly 9bp.

CLOSING YIELDS / 10-YR PERIPHERY EGB SPREADS TO GERMANY:

• Germany: The 2-Yr yield is down 0.3bps at 1.936%, 5-Yr is up 0.8bps at 2.005%, 10-Yr is up 3.9bps at 2.142%, and 30-Yr is up 5.7bps at 2.135%.
• UK: The 2-Yr yield is up 7.2bps at 3.333%, 5-Yr is up 4.9bps at 3.631%, 10-Yr is up 3.8bps at 3.516%, and 30-Yr is up 4.6bps at 3.608%.
• Italian BTP spread up 8.6bps at 215.8bps / Spanish up 3.4bps at 108.3bps

EGB Options: Sonia And Euribor Upside Feature Monday

Monday's Europe rates/bond options flow included:

• RXZ2 141.50/143.50/144.50 broken call fly bought for 30 and 32 in 1.6k
• RXZ2 143/145/146 call fly bought for 17.5 in 1k
• RXZ2 138/141 strangle sold at 269/271 in 1k
• RXZ2 142.50 call bought for 60.5 in 1.1k
• 0RH3 99.00/99.50 call spread bought for 1 in 2.5k
• SFIZ2 96.20/96.40 cs vs 95.80 put, bought cs/sold put for 1.25 in 2k (ref 96.14)

FOREX: Greenback Makes Solid Gains Into Month-End, GBP Poorest On The Board

• The USD traded on the front foot for the entirety of Monday’s trading session with the USD index grinding 0.75% higher to start the week. This comes as markets gear towards positioning for the upcoming Fed rate decision on Wednesday.
• GBP was the poorest performer in G10, falling against all others and further unwinding some of the recent outperformance to put GBP/USD (-1.30%) comfortably back below the 1.15 mark.
• Weakness for the Chinese Yuan persisted throughout the day, with the latest wave of pressure following overnight source reports from Bloomberg, that the US has raised the idea of export control regimes for China with their European partners - mimicking the patterns and techniques used with Russia.
• Furthermore, weaker Purchasing Managers' Index, sliding to 49.2 (contractionary zone) in October from 50.1 in September underpinned the strength seen for USDCNH. The non-manufacturing PMI also dropped by 1.9 points to 48.7, falling below 50 for the first time since May.
• Greenback gains were fairly broad based with both the Euro and Japanese Yen falling victim. USDJPY continues its recovery from the post-intervention 145.11 lows to trade just shy of the 149 handle. In similar vein, EURUSD traded consistently lower despite above expectation Eurozone CPI prints and is now back below 0.99. On the technical front, markets will be watching key support at 0.9839, the former bear channel resistance.
• Overnight we have the RBA decision/statement. While inflation showed no signs of slowing in Q3, recent RBA commentary gives many reasons why it is likely to stick to 25bp in November rather than return to a 50bp move. In the US, we have ISM Manufacturing PMI as well as Jolts data before Wednesday’s FOMC decision.

FX: Expiries for Nov01 NY cut 1000ET (Source DTCC)

• EUR/USD: $0.9625(E1.2bln), $0.9700(E1.1bln), $0.9735-50(E724mln), $0.9800(E1.5bln), $0.9950(E2.0bln), $1.0000(E1.2bln)
• USD/CAD: C$1.3600($921mln)
• NZD/USD: $0.5685(N$619mln)
• AUD/NZD: N$1.1100(A$948mln), N$1.1300(A$1.3bln)
• USD/CNY: Cny7.2500($637mln)

Late Equity Roundup: Weaker but Off Lows

Stocks weaker after the bell, off recent lows, Communication Services and Information Technology sectors underperforming. SPX eminis currently trading -34.25 (-0.88%) at 3877.75; DJIA -162.34 (-0.49%) at 32705.96; Nasdaq -166.8 (-1.5%) at 10937.9.

• SPX leading/lagging sectors: Laggers: Communication Services (-1.46%) underperforming followed by Information Technology (-1.17%) after overnight headlines that Apple IPhone output in question on China Covid lockdown curbs. ON Semiconductor (ON) -6.95%, Western Digital (WDC) -2.45%, Adobe (ADBE) -1.96%, Nvidia -1.72%. Leaders: Energy sector (+1.17%) w/equipment and servicer names outperforming. Health Care (+0.06%) and Real Estate (-0.03) follow.
• Dow Industrials Leaders/Laggers: United Health (UNH) +3.91 at 555.15, Goldman Sachs (GS) +3.49 at 345.31, Travelers (TRV) +2.95 at 184.91. Laggers: Amgen (AMGN) -3.81 at 270.00, Microsoft (MSFT) -2.79 at 233.09, Caterpillar (CAT) -2.50 at 216.84.

E-MINI S&P (Z2):Uptrend Remains Intact

• RES 4: 4100.00 Round number resistance
• RES 3: 4023.44 61.8% retracement of the Aug 16 - Oct 13 downleg
• RES 2: 3981.25 High Sep 14
• RES 1: 3924.25 High Oct 28
• PRICE: 3895.00 @ 1500ET Oct 31
• SUP 1: 3757.50/3641.50 Low Oct 27 / 21
• SUP 2: 3590.50/3502.00 Low Oct 17 / 13 and the bear trigger
• SUP 3: 3491.13 50.0% retracement of the 2020 - 2022 bull cycle
• SUP 4: 3453.78 1.618 proj of the Aug 16 - Sep 7 - 13 price swing

S&P E-Minis maintains a bullish tone and Friday’s resumption of the short-term uptrend reinforces current conditions. Last week’s climb resulted in a break of the 3820.00 hurdle, Oct 5 high. Furthermore, price has traded above the 50-day EMA, at 3834.42. Sights are on 3981.25 next, the Sep 14 high. On the downside, key short-term support has been defined at 3641.50, the Oct 21 low. Initial firm support to watch is at 3757.50, the Oct 27 low.

COMMODITIES: US Calls On Russia To Return To Participation In Black Sea Grain Deal

US State Department spokesperson Ned Price has told reporters that Russia is engaging in a form of "collective global punishment" for its decision to suspend participation in the Black Sea grain corridor initiative.

• Price says that food prices have risen due to uncertainty of around the future of the grain deal: "We need these prices to continue their downward trajectory." As of last week, says Price, "the initiative had moved more than 9.5m tonnes of grain and other foodstuff."
• Price: "It is not in anyone's interest, it is not in Russia's interest, it is not in the interest of the international community to see what could be akin to a form of collective global punishment, for this deal to remain suspended."
• Earlier today, the Russian Defence Ministry said in a statement that it is merely suspending the deal, rather than withdrawing entirely.
• The Russian Def Min said however, that "the movement of ships along the Black Sea corridor is unacceptable," raising the risk that civilian vessels operating in the Black Sea could come under Russian fire.

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
01/11/2022	0030/0930	**		JP	IHS Markit Final Japan Manufacturing PMI
01/11/2022	0145/0945	**		CN	IHS Markit Final China Manufacturing PMI
01/11/2022	0330/1430	***		AU	RBA Rate Decision
01/11/2022	0800/0900			CH	SECO Consumer Confidence
01/11/2022	0930/0930	**		UK	IHS Markit/CIPS Manufacturing PMI (Final)
01/11/2022	1000/1000	**		UK	Gilt Outright Auction Result
01/11/2022	-			DK	Danish General Election
01/11/2022	-	***		US	Domestic-Made Vehicle Sales
01/11/2022	1255/0855	**		US	Redbook Retail Sales Index
01/11/2022	1345/0945	***		US	IHS Markit Manufacturing Index (final)
01/11/2022	1400/1000	***		US	ISM Manufacturing Index
01/11/2022	1400/1000	*		US	Construction Spending
01/11/2022	1400/1000	**		US	JOLTS jobs opening level
01/11/2022	1400/1000	**		US	JOLTS quits Rate
01/11/2022	1530/1130	**		US	US Treasury Auction Result for 52 Week Bill
01/11/2022	2230/1830			CA	BOC Governor Macklem at Senate bank committee