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- Treasury markets held inside the recent range, with markets awaiting key ECB and BoC updates
- Equities see a mixed start to the week, with healthcare strength countered by weakness in materials
- JPY strength persists post-NFP, opens gap with last week's cycle lows
- Treasury futures held inside a 5 tick range Monday, maintaining the post-payrolls pattern that'd initially driven 10y yields sharply lower.
- The longer-end of the curve underperformed, with 30y, 20y yields rising near 2bps apiece, prompting some minor steepening, but recent ranges were wholly respected.
- Markets await the next macro cues, which may emerge at Wednesday and Thursday's Bank of Canada & ECB decisions, with FOMC within the pre-rate decision media blackout period.
- Headlines on Biden's flagship infrastructure package garnered some market focus, with the POTUS due to meet Capito later Monday or Tuesday as well as remaining open to negotiations with other GOP Senators including Mitt Romney. Fiscal stimulus headlines are expected to die down later in the week, as global leaders head to Cornwall, UK for the G7 meeting.
- Tuesday sees the release of April trade balance, JOLTs job openings and the 3yr auction.
A fairly subdued session for most of the European FI space Monday, with anticipation of Thursday's ECB decision and US CPI data keeping many on the sidelines, and anticipated bond supply appearing to weigh.
- Moves in BTPs were noteworthy though, with spreads widening (10Y vs Bunds + 2bps) on an announcement of a 10-Yr BTP syndication announcement tomorrow. Elsewhere, EFSF raised E2.5bln with tap of Apr-24 bond.
- In general, expected issuance appeared to weigh on core and semi-core, with multiple auctions Tuesday (in addition to the syndication expected for new Dec-31 BTP): the Netherlands sells up to E2.5bln of DSL, Austria E1.4bln of RAGB, Germany E4bln of Bund, and the UK GBP4.25bln of Gilt.
- Earlier today, German factory orders unexpectedly contracted in April (though Mar revised higher). German ZEW / IP and Eurozone final Q1 GDP feature Tuesday.
Closing German/UK Yields And 10-Yr Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at -0.664%, 5-Yr is up 1.6bps at -0.582%, 10-Yr is up 1.5bps at -0.198%, and 30-Yr is up 0.6bps at 0.357%.
- UK: The 2-Yr yield is up 1.6bps at 0.085%, 5-Yr is up 2.2bps at 0.358%, 10-Yr is up 1.6bps at 0.806%, and 30-Yr is up 2bps at 1.346%.
- Italian BTP spread up 2.6bps at 111.2bps / Spanish spread up 0.6bps at 67.1bps
Monday's options flow included:
- RXN1 168.5p, bought for 3.5 in 31k Said to be a short cover
- RXN1 169/168.50ps, bought for 2 in ~9k
- RXN1 170.5/169.5/168.5/167.5 put condor bought for 11.5 in
- RXU1 170/166.5ps 1x2, sold atr 38 in 2k
- 2RH2 100.50/100.375/100.125 broken put ladder bought for 2.5 in 11k
- 3RM1 100.37/100.25ps sold at 11 in 5k
- 0LZ1 99.375/99.25/99.125p ladder, bought for Flat in 10k
- 2LM1P 99.50p sold in 10k at 3.5 vs 2LU1 99.37/99.12ps 1x2, bought for 3.5 in 11k
- 2LU1 99.25/99.00ps 1x3, bought for 0.75 in 1.5k
- After consolidating Non-Farm Payroll losses for much of the Asia and European sessions, the greenback gradually retreated during US hours on Monday.
- With very little in the form of market moving headlines, steady supply led the dollar index through Friday's worst levels and back below 90.00 to post 0.2% losses on the day.
- Most G10 counterparts were beneficiaries with Aussie and Kiwi relative outperformers gaining around 0.35%. EUR, GBP, JPY and CAD all strengthened around 0.2% mirroring broader dollar sentiment.
- Despite the slightly softer oil prices, the Norwegian Krona led gains, firming 0.65% against the dollar. NOK strength may have been supported by Health Ministry headlines shortening the interval between vaccine doses, providing optimism for the herd immunity timeline.
- CNH slightly underperformed on the day overall, following the slight miss in trade data released overnight.
- German ZEW headlines the docket on Tuesday, however, markets will eagerly anticipate the release of US CPI on Thursday. Also on the week's agenda are monetary policy decisions/statements from the Bank of Canada and the ECB.
- EUR/USD: E$1.2055-70(E1.6bln-EUR puts), $1.2185-1.2200(E1.1bln), $1.2225-35(E576mln), $1.2265-75(E631mln), $1.2300(E759mln)
- USD/JPY: Y108.45-50($1.3bln), Y109.00($675mln), Y109.50($987mln-USD puts)
- AUD/USD: $0.7745-50(A$891mln)
- NZD/USD: $0.7150(N$601mln), $0.7260(N$1.2bln-NZD puts)
- US equity markets traded mixed into the Monday close, with the S&P 500 and Dow Jones cash indices holding minor losses at the closing bell. This contrasted slightly with modest strength in the tech-led NASDAQ comp, which held around 0.2% above water.
- The US healthcare sector outperformed, with real estate not far behind. These gains were countered in broad weakness for materials names, which fell alongside industrials.
- Biogen was a solid outperformer following the approval of an Alzheimer's disease antibody therapy, prompting a near 60% rally in the stock. Re-opening names also fared well, with Penn National Gaming and Norwegian Cruiselines among the strongest names in the S&P 500.
- The VIX suffered, remaining under pressure and close to multi-month and post-pandemic lows.
- Commodity markets stuck to their recent ranges throughout the Monday session, with WTI and Brent futures edging off last week's best levels to retreat by around 0.4% apiece. There were few major macro drivers Monday, with markets waiting for key rate decisions later this week from the ECB, Bank of Canada and Central Bank of Russia.
- Similarly, gold and silver traded inside the recent range, keeping directional parameters unchanged for now. Spot gold holds just below the $1900/oz level ahead of the Monday close to edge above Friday's high, but Thursday's best levels remain out of reach for now.