MNI ASIA MARKETS ANALYSIS: Weekly Claims Rise Ahead NFP

HIGHLIGHTS

• MNI CHINA-EU: Von Der Leyen Cautions Against "Decoupling" From China
• MNI CHINA-EU: Xi To Macron: 'Europe Is Independent Pole In Multipolar World'
• MNI CHINA-EU: Macron-I Can Count On China To Bring Russia To The Negotiating Table
• MNI MIDEAST: Iran, Saudi Agree To Reopen Embassies, Examine Flights Resuming & Visas
• MNI ITALY: PM Meloni Tightens Grip On Rightist Bloc With Strong Regional Election
• FED BULLARD: RATES NOW IN LOW END OF SUFFICIENTLY RESTRICTIVE, Bbg

US TSYS: Short End Extends Lows Ahead Fri's March Employment Data

• Front month Jun'23 Treasury futures trading mildly weaker after quickly reversing the knee-jerk bid anticipated in the event of a large claims up-revision.
• Tsy futures initially gapped higher (10s 116-30 high) following weekly claims: 18k drop to 228k vs. 200k est, prior revision to 246k, but quickly retraced to opening levels: 10s 116-23.5 (+5), 10Y yield 3.2662%.
• Yield curves have traded in a wide range today, well off early "highs" (2s10s -42.798 high), curves reversed course as the short end extended lows in the second half: 2s10s -52.850 at the moment (-4.710).
• Implied rate hikes gained slightly while rate cuts through year end have subsequently pared back from this morning's "highs".
• Fed funds implied hike for May'23 is currently at 12.6bp vs. 11.1bp, Jun'23 +8.1bp vs. 5.6bp cumulative at 4.893%.
• Projected rate cuts later in the year continue to recede from Wednesday's post-ADP levels: Sep'23 cumulative -33.3bp vs -36.6bp earlier to 4.490%, to -69.9bp vs. -75.5bp for Dec'23 (-84.9bp Wed) at 4.119.
• Focus turns to Friday's employment data for March at 0830ET. Reminder: Early close tomorrow in observance of Good Friday: 1100ET, Globex close at 1115ET. Full session on Monday. Side note: UK markets closed Friday and Monday.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00042 to 4.80971% (+0.00885/wk)
• 1M +0.01015 to 4.90029% (+0.04258/wk)
• 3M -0.01314 to 5.19786% (+0.00515/wk)*/**
• 6M -0.05471 to 5.23743% (-0.07557/wk)
• 12M -0.07386 to 5.12571% (-0.17958/wk)
• * Record Low 0.11413% on 9/12/21; ** New 16Y high: 5.22257% on 4/3/23

• Daily Effective Fed Funds Rate: 4.83% volume: $102B
• Daily Overnight Bank Funding Rate: 4.82% volume: $255B

• Secured Overnight Financing Rate (SOFR): 4.81%, $1.427T
• Broad General Collateral Rate (BGCR): 4.79%, $524B
• Tri-Party General Collateral Rate (TGCR): 4.79%, $510B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage falls to $2,173.663B w/ 105 counterparties, compares to yesterday's $2,243.011B. All-time record high of $2,553.716B reached December 30, 2022; high usage for 2023: $2,375.171B on Friday March 31, 2023

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

• SOFR Options:
  • +5,000 SFRM3 94.93/95.00/95.18 put trees 1.0-1.25
  • -2,500 SFRZ3 94.75/95.50 2x1 put spds, 11.0
  • +1,000 SFRU3 97.00/98.50 1x2 call spds, 7.0
  • Block, 6,000 OQM3 95.87/96.25 3x2 put spds, 10.5 2-legs over ref 96.885
  • 2,500 SFRM3 95.00/95.25/95.50 call flys ref 95.22
  • 3,000 SFRM3 94.62 puts, 1.5 ref 95235
  • 2,200 OQJ3 97.37/97.50 call spds, ref 96.89
• Treasury Options:
  • 2,000 TYK3 114.5 puts, 11 ref 116-17
  • 2,500 TYK3 115/115.75 put spds, 12 ref 116-19.5
  • +4,000 TUK3 103/103.5 put spds, 9.5
  • 1,500 FVK3 111/112/112.5 broken call flys ref 110-27.5
  • 1,500 FVK3 110.75 puts, ref 110-25
  • 2,000 TYK 118 calls, 25 ref 116-17.5
  • 2,000 TUM3 104.75/105 call spds ref 103-28
  • 1,500 FVM3 109 puts, 22 ref 110-28.5
  • 1,300 TYK3 117/118/119 call flys, ref 116-20
  • 2,200 TYK3 118 calls, 25 ref 116-15

EGBs-GILTS CASH CLOSE: Busy Week Finishes On Flatter Pre-Holiday Note

The UK and German curves bear flattened Thursday to end an otherwise strong holiday-shortened week, with early strength at the short end reversing toward the close.

• The session was characterised by limited volumes and few event catalysts of note.
• Softer-than-expected US data has been the driving force in markets all week, and a jobless claims reading to the high side of expectations pushed Bund and Gilt yields to session lows in a knee-jerk move in the early European afternoon.
• But the move quickly faded, in large part due to seasonal adjustment revisions at play, and global core FI retreated ahead of the long weekend - with the US nonfarm payrolls reading Friday also on traders' minds.
• Equities rallied into the close, weighing on safe havens too. Periphery spreads were fairly steady throughout the session though, widening only mildly.
• BoE terminal rate hike pricing was little changed (4.63% for Sept); ECB terminal rose 5.6bp (to 3.52%, also for Sept). Little reaction to ECB Lane's reiteration that a May hike is the baseline case (futures continued to price in 22bp, unchanged).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3bps at 2.554%, 5-Yr is up 0.2bps at 2.18%, 10-Yr is up 0.1bps at 2.183%, and 30-Yr is up 1.6bps at 2.282%.
• UK: The 2-Yr yield is up 3.1bps at 3.372%, 5-Yr is up 1.5bps at 3.271%, 10-Yr is up 0.4bps at 3.432%, and 30-Yr is down 0.1bps at 3.771%.
• Italian BTP spread up 1.6bps at 184.9bps / Spanish up 1.8bps at 104.5bps

EGB Options: Euribor Upside Features Again Ahead Of The Holiday Weekend

Thursday's Europe rates / bond options flow included:

• RXK3 131.50/130.00ps 1x2, bought for 1 in ~4.3k.
• ERU3 97.00/98.00 call spread bought for 12.75 in 10k (ref: 96.53)

FOREX: NZD Remains Poorest Performer, DXY Unchanged Ahead Of NFP

• Despite the firmer sentiment across equity markets through the US session on Thursday, antipodean currencies have consolidated earlier losses. This sees NZD as the weakest in G10, declining 1% against the greenback amid a slightly weaker commodity complex. Despite the sharp drop, price remains around 50 pips shy of the weekly lows at 0.6208.
• In similar vein, AUDUSD is 0.6% lower as iron ore prices continue their slide to around 6% on the week.
• Overall, the USD index remains just south of unchanged as we approach tomorrow’s non-farm payrolls. The single currency has outperformed and has prompted EURUSD to regain some ground back above the 1.09 handle.
• With 1.0930 marking a key short-term hurdle for EURUSD bulls a sustained break would reinstate the recent bull theme and signal scope for a move to 1.1033, the Feb 2 high.
• USDJPY maintained an upward bias, edging around 1% higher from the overnight 130.78 lows but remains comfortably below the pre-JOLTS data levels of 132.70.
• For tomorrow’s data, Bloomberg consensus looks for still solid nonfarm payrolls growth of 230k in March as it falls back to closer to December’s pace with a return of more typical weather. However, actual expectations might be a little lower now after a recent string of weak data labour indicators.

FX: Large option expiry could be at play

• Not much change in the Dollar against G10s, NZD is still the worst performer down 0.82%, albeit off its worst levels.
• The Greenback is around flat versus GBP, EUR, NOK, and CHF.
• Latest mover is the USDJPY, pushing higher, but well within yesterday's range, and still short of yesterday's high at 131.84.
• Note that we have some large option expiry for today (expiry at 15.00BST/10.00ET), that could act as magnets and keep the EURUSD and USDCAD inside those strikes..
  Of note:
• EURUSD 3.95bn between 1.0875/1.0950.
• USDCAD 5.47bn between 1.3430/1.3500.
• USDJPY 1.85bn at 131.00/131.50.

Equity Roundup: Near Late Session Highs

• US stocks continue to hold mildly higher levels in late trade: SPX Eminis (4134.0 +16.75) and Nasdaq (12,092.0 +95.0) outperforming Dow Industrials (33,489.5 +7.0) all near modest session highs marked recently.
• Modest two-way positioning remains thin ahead of Friday's March employment data (+230k est vs. +311k prior).
• Energy, Consumer Staples and Materials sectors the top three S&P index laggers. Lead gainers include Communication Services, Information Technology and Financials (regional banks outperforming insurance and financial services names): First Republic (FRC +4.39%, Key Bank +3.95%, Well Fargo +3.0%.
• For a technical point of view, S&P E-minis maintains a bullish tone after the index recently breached resistance at 4119.50, the Mar 6 high, reinforcing a bullish theme.
• The move higher has also resulted in a break of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key M/T resistance. Firm support lies at 4039.75, the 50-day EMA.

E-MINI S&P (M3): Outlook Remains Bullish

• RES 4: 4244.00 High Feb 2 and a bull trigger
• RES 3: 4223.00 High Feb 14
• RES 2: 4205.50 High Feb 16
• RES 1: 4171.75 High Apr 4
• PRICE: 4133.00 @ 1445ET Apr 6
• SUP 1: 4078.00 Low Mar 31
• SUP 2: 4039.75 50-day EMA
• SUP 3: 3980.75 Low Mar 28
• SUP 4: 3937.00 Low Mar 24

S&P E-minis maintains a bullish tone and the latest pullback is considered corrective. Price has recently breached resistance at 4119.50, the Mar 6 high, reinforcing a bullish theme. The move higher has also resulted in a break of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key M/T resistance. Firm support lies at 4039.75, the 50-day EMA.

COMMODITIES: Crude Sees A Steady Session To End Week Bolstered By OPEC+

• Crude oil sees an unusually steady session, largely tracking sideways and in doing so broadly consolidating the jump seen first thing in the week after the surprise OPEC+ cut announcement for a large weekly gain. Tomorrow’s US nonfarm payrolls could provide the latest, more significant macro steer for demand implications.
• WTI is +0.04% at $80.64, with resistance at 81.81 (Apr 4 high) and support at $77.60 (23.6% retrace of Mar 20 - Apr 3 rally).
• Brent is +0.06% at $85.04 with resistance at $86.44 (Apr 3 high) and support at $82.57 (23.6% retrace of Mar 7 – Apr 3 uptrend).
• Gold is -0.5% at $2009.80 as it pulls back further off yesterday’s high of $2032.1 (forming initial resistance) despite the USD on balance moving softer today. Intraday correlation with the US dollar has softened these past two days but still holds over the week as a whole, with gold benefiting from an on net weaker USD.
• Weekly moves: WTI +8.4%, Brent is +7.2%, Gold is +1.5%, US nat gas -4.9%, EU TTF -1.1%.

Friday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
07/04/2023	0645/0845	*		FR	Foreign Trade
07/04/2023	1230/0830	***		US	Employment Report
07/04/2023	1900/1500	*		US	Consumer Credit
10/04/2023	-			EU	ECB Lagarde at IMF/World Bank Spring Meetings
10/04/2023	1400/1000	**		US	Wholesale Trade
10/04/2023	2015/1615			US	New York Fed's John Williams
11/04/2023	2301/0001	*		UK	BRC-KPMG Shop Sales Monitor
11/04/2023	0600/0800	*		NO	CPI Norway
11/04/2023	0900/1100	**		EU	Retail Sales
11/04/2023	1000/0600	**		US	NFIB Small Business Optimism Index
11/04/2023	-			EU	ECB Lagarde and Panetta in IMF/World Bank Spring Meetings
11/04/2023	1255/0855	**		US	Redbook Retail Sales Index
11/04/2023	1600/1200	***		US	USDA Crop Estimates - WASDE
11/04/2023	1730/1330			US	Chicago Fed's Austan Goolsbee
11/04/2023	2200/1800			US	Philadelphia Fed's Patrick Harker