MNI ASIA MARKETS ANALYSIS: Yields Inch Higher, Heavy Tsy Rolls

US TSYS Extend Late Session Lows, SF Daly Echoes Powell, Cautious on Cut Size

• Treasury futures extended lows into the closing bell, gradually declining since midday: Sep'24 10Y marked 113-18.5 (-4), 10Y yield at 3.8160% (+.0170).
• The late extension possible tied to SF Fed Daly sounding a little more cautious over pace/size of rate cuts while generally echoing Chairman Powell's "the time is now" opinion from Jackson Hole.
• Treasury futures have reversed the modest overnight support after the open, see-sawing lower on narrow range after Core durable goods orders were softer than expected in preliminary July data, falling -0.1% M/M (cons 0.1) after a downward revised 0.5% (initial 0.9%).
• The Dallas Fed manufacturing survey improved by more than expected to -9.7 (cons -16.0) in August from -17.5, still firmly negative but its highest level since Jan 2023.
• Despite London close for bank holiday, heavier volumes so far (TYU4>3.5M) driven by Sep/Dec roll efforts with percentage complete near 60% in 5s ahead Fri's first notice.
• Cross asset roundup: US$ index gained (+.148 at 100.866), crudes trading higher (WTI +2.0 at 76.83) on Libya announcing force majeure recently, not to mention mid-East tension following after Israel bombed target in Lebanon.
• Data on tap Tuesday: Housing Data, Consumer Confidence, regional Fed data from Dallas and Richmond Fed.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements: London Bank holiday - no new settles, below are Friday's for reference:

• 1M -0.00194 to 5.27601 (-0.05579/wk)
• 3M +0.00933 to 5.08064 (-0.04777/wk)
• 6M +0.01895 to 4.77370 (-0.06599/wk)
• 12M +0.03663 to 4.30022 (-0.08838/wk)

• Secured Overnight Financing Rate (SOFR): 5.33% (+0.02), volume: $2.152T
• Broad General Collateral Rate (BGCR): 5.32% (+0.01), volume: $779B
• Tri-Party General Collateral Rate (TGCR): 5.32% (+0.01), volume: $760B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $93B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $275B

FED Reverse Repo Operation

RRP usage rebounds to $353.557B from $312.896B Friday -- compares to $286.660B on Wednesday, Aug 7 -- the lowest since mid-May 2021. Number of counterparties 63 from 65 prior.

US SOFR/TREASURY OPTION SUMMARY

• SOFR Options:
  • Block, 5,000 SFRZ4 96.25/96.37 call spds, 1.5 ref 95.755
  • Block 18,979 SFRU4 95.25/95.50 call spds 1.25 vs. 95.075/0.15%
  • +15,000 SFRU4 95.31/95.43 call spds, 0.5 vs. 95.09/0.05%
  • 4,400 SFRF5 96.75/97.25/97.75 call trees ref 96.28
  • +4,000 SFRU4 95.18/95.31 call spds 2.5 ref 95.085
  • +5,000 SFRV4 96.00/96.12 call spds 2.25 ref 95.785
  • -1,500 SFRM5 96.62 straddles, 85.5 ref 96.625
  • SFRU4 95.18/95.37/95.56 call flys, 2.75 ref 95.0925
  • SFRU4 95.12/95.18/95.25 call flys, .25 ref 95.0925
  • +10,000 SFRU4 95.18/95.25/95.31/95.37 call condors, 1.25 vs 95.1075/0.05%
  • +10,000 SFRU4 95.18/95.37/95.56 call flys, 2.75 ref 95.0925
  • Block, 2,500 SFRH5 96.00/96.50/97.00 call flys vs. 2QH5 97.25/97.50 call spds, 11.5 net/SFRH5 over
  • Block, 5,000 SFRH5 96.00/96.50/97.00 call flys vs. 3QH5 97.25/97.50 call spds, 4.5 net/SFRH5 over
• Treasury Options:
  • 1,300 TUZ4 102/102.5/103 put flys, ref 103-29.62
  • +19,000 TYV4 112.5 puts, 14 ref 114-13
  • Block/screen, +51,000 TYV4 112.75 puts, 18 ref 114-08
  • Block, +50,000 TYV4 113 puts, 18 ref 114-13
  • 10,000 TYV4 111.75 puts
  • over 8,800 TYV4 113.5 puts
  • 3,300 TYV4 115 calls
  • 4,500 TYV4 116 calls

BONDS: EGBs CASH CLOSE: Yields Tick Higher, With German Belly Underperforming

EGBs softened modestly Monday, amid a UK market holiday.

• Yields rose early in the session, in part due to a rise in crude oil prices on a Libyan output stoppage.
• German IFO came in largely in line with expectations, but nonetheless showed a slight deterioration in sentiment in August vs July.
• 10Y Bund yields briefly tested the Aug 15 high but pulled back toward the cash close, ultimately trading within recent ranges. The belly of the German curve modestly underperformed.
• Periphery EGB spreads were little changed, as risk assets failed to find a decisive direction.
• Tuesday brings the final reading of German 2Q GDP and GfK Consumer Confidence, and ECB's Knot and Nagel speaking.
• UK markets return from holiday as well (with an expected policy speech by PM Starmer).
• The main event of the week is the Eurozone August flash CPI round on Thursday and Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.4bps at 2.398%, 5-Yr is up 3bps at 2.162%, 10-Yr is up 2.3bps at 2.248%, and 30-Yr is up 1.3bps at 2.483%.
• Italian BTP spread up 0.6bps at 134.8bps  / Spanish up 0.4bps at 79.9bps  
   

EGB OPTIONS: Notable Euribor Upside Monday

Monday's Europe rates/bond options flow included:

• DUV4 106.80/107.20cs 1x2, bought for 4.5 in 3.5k
• RXV4 140.50c, bought for 2 in 1k
• RXV4 132.50/130.50ps, bought for 28 in 1k
• ERZ4 97.00/96.87/96.75p fly 1x3x2, bought for -1 in 4k
• ERH5 97.75/98.00cs vs 97.37/97.12ps, bought the cs for half in 20k

FOREX: USD Hovers Near Session Highs Up 0.15% as Equities Dip

• The modest pressure on equities Monday has supported the greenback, although volumes and ranges have remained capped, largely owing to the UK holiday and the lack of tier one data across global markets.
• The most volatile pair has unsurprisingly been USDJPY, which having extended Friday’s weakening trend to reach a fresh low of 143.45 overnight in the APAC session has since bounced over 100 pips. USDJPY’s trend structure is bearish and moving average studies remain in a bear-mode set-up. A stronger reversal lower would refocus attention on key support at 141.70, the Aug 5 low. Clearance of this level would confirm a resumption of the bear trend.
• The slightly firmer greenback on Monday has weighed on the likes of EUR, AUD and NZD, with the latter underperforming its G10 counterparts, down 0.4%.
• In emerging markets, the elevated uncertainty surrounding political risks in Mexico continue to weigh on the peso. USDMXN is +1.5% at typing and trading around 19.40 as we approach the APAC crossover. Protestors took to the streets across Mexico on Sunday in the latest opposition to AMLO’s proposed judicial overhaul and the President described some of the latest criticism as ridiculous earlier today.
• A bullish theme in USDMXN remains intact following the rally between Jul 12 and Aug 5. Last week’s gains also represent a positive development. Initial short-term objectives are 19.5999 and 19.8362, the 61.8% and 76.4% retracement points of the sell-off between Aug 5 - Aug 16.
• US consumer confidence and Richmond Manufacturing highlight Tuesday’s economic data schedule.

Late Equities Roundup: Weaker Chip Stocks Temper Oil & Gas Gains

• Stocks remain mixed in late Monday trade, off lows with the Dow index outpacing weaker SPX and Nasdaq indexes. Currently, the DJIA trades up up 27.64 points (0.07%) at 41203.84, S&P E-Minis down 18.75 points (-0.33%) at 5634.25, Nasdaq down 146.6 points (-0.8%) at 17733.59.
• Information Technology and Consumer Discretionary sectors continued to underperform in late trade, semiconductor stocks weighing on the former: Broadcom -3.81%, Micron -3.65%, Advanced Micro Devices -3.0%. Tesla -3.44%, Deckers Outdoor -3.01%, Tapestry Inc -2.66% weighed on the Consumer Discretionary sector.
• On the flipside, Energy and Consumer Staples sectors outperformed in late trade: oil and gas stocks underpinned as crude prices rallied (WTI +2.42 at 77.42 -- on Libya announcing force majeure recently, not to mention mid-East tension following after Israel bombed target in Lebanon.): EOG Resources +2.47%, ConocoPhillips +1.92%, Exxon +1.87%. Food retailers buoyed the Consumer Staples sector: Kroger +2.10%, Costco +1.35%Dollar General +0.66%.
• Late cycle corporate earnings expected late Tuesday: Nordstrom Inc, SentinelOne Inc, PVH Corp and Semtech Corp. On Wednesday: Chewy Inc, Kohl's Corp, Foot Locker Inc, Veradigm Inc, Bath & Body Works Inc, Abercrombie & Fitch Co, NVIDIA Corp, Salesforce Inc, Five Below, HP, Victoria's Secret, NetApp and Crowdstrike Holdings.

EQUITY TECHS: E-MINI S&P: (U4) Bull Cycle Extends

• RES 4: 5821.25 1.00 proj of the Apr 19 - Jul 16 - Aug 5 price swing
• RES 3: 5800.00 Round number resistance
• RES 2: 5721.25 High Jul 16 and Key resistance
• RES 1: 5669.00 Intraday high
• PRICE: 5635.00 @ 1545 ET Aug 26
• SUP 1: 5493.52 50-day EMA
• SUP 2: 5438.75/5319.50 Low Aug 14 / 9
• SUP 3: 5182.00 Low Aug 8
• SUP 4: 5120.00 Low Aug 5 and the bear trigger

A bullish theme in S&P E-Minis remains intact and the contract is trading higher today. Price has cleared resistance at 5600.75, the Aug 1 high and this signals scope for an extension towards key resistance and the bull trigger at 5721.25, the Jul 16 high. A break would resume the primary uptrend. On the downside, support to watch lies at 5493.52, the 50-day EMA. A clear break of it is required to instead highlight a potential bearish threat.

COMMODITIES: Crude Futures Surge on Libya Production Disruptions

• WTI has surged today after the Libya’s Benghazi-based government announced that it will halt production at oil fields under its control. Libya’s Eastern-based government announced a “force majeure” at all fields, terminals and oil facilities, Bloomberg said. The move is in response to the rival Tripoli-based government’s attempt to take control of the Libyan central bank.
• A blockade by Libya’s Eastern-based government could cut output to around 200k b/d, down from 1.15m b/d in July, according to an updated estimate by Stratfor. Front-month WTI is up around 3% at 77.08$/bbl, narrowing the gap to key resistance at $78.54, the Aug 12 high.
• For natural gas, Henry Hub is heading for its lowest close since Aug. 5 amid cooling temperatures across large parts of the continental USA. US Natgas SEP 24 is down 2.4% at 1.97$/mmbtu.
• In precious metals, both spot gold and silver have largely ignored the moderate uptick for the US dollar and have traded higher, extending both Friday’s rally and gold’s underlying bullish trend that saw the yellow metal print fresh all-time highs last week.
• Echoing this theme across the commodities space, copper and iron ore both trade higher, with the latter posting a solid 2.3% increase to start the week, having come under significant pressure across the first half of August.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
27/08/2024	2301/0001	*		UK	BRC Monthly Shop Price Index
27/08/2024	0600/0800	***		DE	GDP (f)
27/08/2024	0600/0800	*		DE	GFK Consumer Climate
27/08/2024	0600/0800	**		SE	PPI
27/08/2024	1000/1100	**		UK	CBI Distributive Trades
27/08/2024	1255/0855	**		US	Redbook Retail Sales Index
27/08/2024	1300/0900	**		US	S&P Case-Shiller Home Price Index
27/08/2024	1300/0900	**		US	FHFA Home Price Index
27/08/2024	1300/0900	**		US	FHFA Home Price Index
27/08/2024	1300/0900	**		US	FHFA Quarterly Price Index
27/08/2024	1300/0900	**		US	FHFA Quarterly Price Index
27/08/2024	1400/1000	***		US	Conference Board Consumer Confidence
27/08/2024	1400/1000	**		US	Richmond Fed Survey
27/08/2024	1430/1030	**		US	Dallas Fed Services Survey
27/08/2024	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
27/08/2024	1700/1300	*		US	US Treasury Auction Result for 2 Year Note