MNI ASIA MARKETS ANALYSIS - USD Inches Higher in Holiday-Thinned Trade

EGBs-GILTS CASH CLOSE: Italy Confidence Votes Awaited

The German curve ended steeper and the UK's mixed, though Monday's session was almost completely devoid of price catalysts, with more attention being put on matters after hours and later in the week.

BTP spreads were basically unchanged after early widening: focus on lower house confidence vote in PM Conte's gov't this evening, and Senate vote Tuesday.

Also with little supply (just Slovakia) or data today, attention turns to later this week, with German ZEW and EU SURE / UK 2046 Gilt / France 50-Yr OAT syndications potentially Tuesday.

ECB meeting Thursday a clearer focus later in the week.

Closing levels:

• Germany: The 2-Yr yield is up 0.5bps at -0.715%, 5-Yr is up 1.7bps at -0.717%, 10-Yr is up 1.6bps at -0.527%, and 30-Yr is up 1.8bps at -0.115%.
• UK: The 2-Yr yield is down 0.3bps at -0.137%, 5-Yr is down 0.8bps at -0.049%, 10-Yr is down 0.1bps at 0.287%, and 30-Yr is down 0.6bps at 0.862%.
• Italian BTP spread up 0.1bps at 115.8bps /Spanish up 0.4bps at 60.5bps

EUROPEAN OPTIONS SUMMARY: Plenty Of Bund Downside

Monday's options flow included:

• OEG1 135.25 call bought for 6 in 3.5k v OEG1 135.25 put sold at 15 in 1.15k
• RXG1 177.50/177.00/176.50 put ladder bought for 9 in 1k
• RXG1 176.00/178.00/178.50 broken call ladder bought for 120 in 1k
• RXG1 177.50/177.00 put spread bought for 20 in 2.5k
• RXH1 170.00 put bought for 1 in 6.75k
• RHX1 177.00/176.00/175.00 put fly sold at 7 in 1k
• RXH1 176.00/175.00 put spread sold at 12.5 in 1k
• 2LZ1 99.625/99.50 put spread bought for 3 in 3k
• 3LU1 99.50/99.25 1x1.25 put spread (bought) v 2LU1 99.625/99.375 put spread (sold), paying net 0.5 for the blue in 7.5k

FOREX: Holiday-Thinned Trade Favours Greenback

The greenback remains the best performing currency for 2021, rising further early Monday despite MLK Day in the US keeping most markets quiet and thin. Equity markets that remained open traded mixed but pretty non-directional, keeping a modest bidtone under the JPY, USD throughout.

EUR/USD hit new 2021 lows of 1.2054, falling through the mid-December lows in the process. This further relieves overbought signals present in the recent rally, opening the 50% Fib retracement of the November run-up at 1.1976 over the medium-term.

Focus Tuesday turns to the continued flow of earnings from the US, Germany's ZEW survey and a speech from BoE's Haldane.

OPTIONS: Expiries for Jan19 NY cut 1000ET (Source DTCC)

EUR/USD: $1.1900(E575mln), $1.2000(E1.1bln), $1.2100(E567mln), $1.2150-60(E729mln), $1.2190-1.2210(E4.7bln-EUR puts), $1.2250(E1.2bln-EUR puts), $1.2300(E1.4bln-EUR puts), $1.2350-55(E1.1bln-EUR puts)

USD/JPY: Y102.50-55($568mln), Y103.00($1.4bln), Y103.50-55($787mln), Y103.65-75($695mln), Y103.90-104.00($1.1bln)

GBP/USD: $1.3525-35(Gbp512mln)

EUR/GBP: Gbp0.9020(E568mln)

AUD/USD: $0.7450(A$1.2bln), $0.7700(A$1.2bln)

EQUITIES: European Stocks Edge Higher

Among the markets that remained open on MLK day, European indices inched higher Monday, with gains of 0.1-0.4% across the continent. German stocks outperformed while UK names lagged.

The consumer discretionary sector was the best performer as the likes of Adidas, Richemont and Swatch traded well, while utilities and communication services sank.

Focus turns to the continuation of earnings season, with Goldman Sachs, Bank of America, Morgan Stanley and Netflix all due in the coming days.

COMMODITIES: WTI, Brent Deflated

In a muted, holiday-thinned session the USD was generally stronger against most others, weighing on the commodity complex and energy products in general. WTI and Brent crude futures pulled around 0.5% lower apiece, further relieving the modest overbought conditions present over the multi-month rally in oil prices.