MNI ASIA MARKETS ANALYSIS: Ylds at Wk Highs Into Fed Blackout

US TSYS Back Near Lows of Week as Fed Enters Policy Blackout

• Treasury futures remain weaker after the bell, near lows for the week. No data or obvious headline driver for the break lower, while NY Fed Williams monetary policy panel discussion didn't break any new ground ahead tonight's policy blackout that runs through August 1.
• Williams said the central bank remains committed to its 2% inflation target, adding that the longer run trends affecting a low neutral rate in the U.S. are still in place.
• Tsy Sep'24 10Y futures currently -13 at 110-26 vs. 110-25 low. Initial technical support at 110-15+ (20-day EMA) followed by 110-03 (50-day EMA) values.
• While market depth may be thin, net volumes were strong for summer markets: TYU4 over 1.4M after the bell. Volumes surged on the back of news that cloud software provider CrowdStrike was having outages that affect Microsoft systems around the globe overnight. Headlines of workaround solutions having been filtering through the last couple hours.
• Speculation over whether President Biden will pull out of his run for a second term continue. Opinions vary over how FI markets will react if Biden pulls out, from no reaction at all to a surge in yields depending on who fills the void. Debate over price action and curve moves were ongoing as markets game out rate cuts, taxes, tariffs, mass deportations, etc.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M +0.00162 to 5.34675 (+0.01895/wk)
• 3M +0.00098 to 5.28299 (-0.00508/wk)
• 6M -0.00107 to 5.13468 (-0.03012/wk)
• 12M -0.00530 to 4.80026 (-0.06528/wk)

• Secured Overnight Financing Rate (SOFR): 5.34% (-0.01), volume: $2.014T
• Broad General Collateral Rate (BGCR): 5.32% (-0.01), volume: $799B
• Tri-Party General Collateral Rate (TGCR): 5.32% (-0.01), volume: $778B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $80B
• Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $235B

FED Reverse Repo Operation

RRP usage recedes up to $379.801B from $391.652B on Thursday. Number of counterparties at 67 from 66 prior. Today's usage compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.

SOFR/TEASURY OPTION SUMMARY

• SOFR Options:
  • 6,500 SFRZ5 95.2595.75 2x1 put spds
  • +15,000 SFRZ4 95.25/95.50 call spds 1.5 over 2QZ4 96.75/97.00 call spds
  • +5,000 SFRM5 97.00 calls, 13.0 vs. 95.98/0.18%
  • +7,000 0QZ4 96.50/96.75 call spds 8.0 vs. 96.30/0.10%
  • +20,000 SFRH5 95.50 put vs 2QH5 95.75 puts +5.5-6.0
  • +8,000 SFRH5 95.00/95.25/95.50 put trees, 4.75
  • +5,000 SFRZ4 95.31/95.50/95.68 call tree 0.5
  • +5,000 SFRZ4 95.25/95.50cs vs S2Z 96.75/97.00cs 1.5
  • +6,000 SFRH4 95.50p vs 2QH4 95.75 puts 5.5
  • 2,000 SFRU4 94.81/94.93/95.06 call flys
  • 1,000 0QQ4 96.62/97.00 2x3 call spds
• Treasury Options:
  • 10,000 FVQ4/wk1 FV 107.75/108.25 call spd spds
  • over 15,000 TYQ4/TYU4 111 call spd, 31 ref 110-27.5
  • +6,000 FVU4 107.25 straddles, 105-105.5
  • over 5,100 TYQ4 111.5 calls, 10 last
  • 4,000 TYQ4 110.5 puts, 8 last
  • over 4,400 TYQ4 110.25 puts, 5
  • +10,000 Monday weekly 10Y 111.75 calls, 2 ref 111-06.5
  • over 6,400 Wednesday weekly 5Y 107 puts, 2 ref 107-13.25 (expire next Wed)

FOREX: Antipodeans Falter with Equities Remaining on Back Foot

• Major equity indices remained on the back foot on Friday, having come under significant pressure in the latter half of the week. Despite this, the USD index only rose 0.15%, with most major currencies respecting relatively narrow ranges ahead of the weekend.
• Risk sensitive AUD and NZD were the biggest losers on Friday, with NZDUSD (-0.56%) extending on some early weakness as the NZ-US 2yr spread fell back below 0bps.
• We highlight the most recent AUDNZD outperformance has been driven by a narrowing in the NZ-AU 3-month swap rate 1-year forward (1Y3M) spread, which has narrowed more than 190bps since its cyclical high in mid-2023.
• For AUDUSD itself, price action sees the pair slip back below the prior breakout level at 0.6715, a potentially bearish development if we were to see a weekly close below this mark. A deeper retracement lower would place the focus on 0.6666, the 50-day EMA and then 0.6576, the Jun 10 low and a key support.
• Despite the impressive 350 pip range for USDJPY this week, the pair sits just moderately lower as markets digest the most recent intervention from the MOF/BOJ and the upcoming central bank meeting at the end of July.
• The underlying softening of US data prompted an extension lower for USDJPY, exacerbated by a yen positioning squeeze as analysts scrutinized the attractiveness of carry trade strategies. USDJPY printed as low as 155.38 on Thursday, however, safe haven dollar demand has provoked a strong recovery off these lows to around 157.50 at typing.
• Overall, the most recent selloff highlights a potential reversal and signals scope for a deeper retracement, towards 154.55 next, the Jun 4 low. Initial firm resistance is seen at 159.16, the 20-day EMA.
• With a quiet start to next week’s data schedule, emphasis will be placed on European flash PMIs, the Bank of Canada decision and US GDP.

FX OPTIONS: Expiries for Jul22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0845-50(E675mln), $1.0925(E527mln), $1.0950(E581mln), $1.0975(E1.1bln)
• USD/JPY: Y158.00($1.7bln), Y160.45($1.1bln)
• GBP/USD: $1.2940(Gbp504mln), $1.2975-85(Gbp656mln)
• EUR/GBP: Gbp0.8466-75(E926mln)
• AUD/USD: $0.6700(A$796mln)
• USD/CAD: C$1.3575($1.3bln), C$1.4000($652mln)
   

Late Equities Roundup: CrowdStrike Issues Continues to Weigh on IT

• Stocks remain weaker late Friday, near session lows the S&P Eminis and Nasdaq indexes are at early July levels while the Dow is near one week lows a day after marking a new all time high of 41,370.37.
• Currently, the DJIA is down 375.97 points (-0.92%) at 40295.49, S&P E-Minis down 38.75 points (-0.69%) at 5556.25, Nasdaq down 128.1 points (-0.7%) at 17743.59.
• Information Technology sector shares led laggers in the second half followed by Materials and Consumer Discretionary sectors. Outages for cloud software provider CrowdStrike saw share prices fall more than 15% to -11.46% at the moment as workaround solutions were implemented. The outage caused disruptions for other IT companies, however, including Intel -5.43%, EPAM Systems -4.06% and ON Semiconductors -4.19%.
• Meanwhile, chemical stocks weighed on the Materials sector: FMC Corp -3.92%, PPG Ind -3.61%, Celanese -3.13%. Autos and parts makers weighed on Consumer Discretionary sector: Aptiv -4.6%, Tesla -4.16%, Ford -3.85% and Borg Warner -3.66%.
• Conversely, Health Care and Communication Services sectors led gainers in late trade, equipment and servicer shares buoyed the former: Intuitive Surgical gained 8.4% reporting strong earnings late Thursday, Boston Scientific +2.28%, Abbott Labs +1.5%. Meanwhile, interactive media and services shares supported Communication Services: Meta +0.75, Google +0.25%.
• Early Monday earnings announcements are expected from Verizon Communications, Truist Financial Corp and IQVIA Holdings. Monday afternoon earnings announcements from Nucor Corp, W R Berkley, Alexandria Real Estate, Crown Holdings and Cadence Design Systems.

COMMODITIES: Crude Falls To Mid-June Levels, Gold Pulls Back From Record High

• Renewed Gaza ceasefire hopes, China weakness and a stronger dollar weighed on crude markets on Friday.
• WTI Aug 24 is down by 3.0% at $80.4/bbl.
• For WTI futures, support at the 50-day EMA, at $79.43, remains intact. This average represents an important pivot level and a clear break would highlight a stronger reversal.
• Spot gold has fallen by 1.9% to $2,399/oz, leaving it 3.4% below the fresh record high set on Wednesday.
• The trend condition in gold remains bullish, despite the fade off the mid-week highs and the medium-term trend still points higher.
• The breach of key resistance at $2,450.1, the May 20 high, opens the $2500.00 handle next. Initial support is at $2,389.5, the 20-day EMA.
• Silver has also fallen by 2.3% to $29.1/oz, leaving it 5.5% lower on the week.
• Silver has slipped through support Friday, to tilt the short-term outlook bearish on the move through the 50-day EMA. Key support and the bear trigger lies at $28.573, the June 26 low.
• Meanwhile, copper has slipped another 1.0% to $423/lb, due to disappointment over a lack of stimulus measures from China. The red metal has fallen almost 8% this week to its lowest level since April 8.
• Copper has now pierced support at $426.12, a Fibonacci retracement. Below here, key support is at $402.35, the Mar 27 low.

MONDAY-TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
22/07/2024	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
22/07/2024	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill
23/07/2024	0700/0900			EU	ECB's Lane at ECB/IMF conference in Frankfurt
23/07/2024	0900/1000	*		UK	Index Linked Gilt Outright Auction Result
23/07/2024	1100/0700	***		TR	Turkey Benchmark Rate
23/07/2024	1230/0830	**		US	Philadelphia Fed Nonmanufacturing Index
23/07/2024	1255/0855	**		US	Redbook Retail Sales Index
23/07/2024	1400/1600	**		EU	Consumer Confidence Indicator (p)
23/07/2024	1400/1000	***		US	NAR existing home sales
23/07/2024	1400/1000	**		US	Richmond Fed Survey
23/07/2024	1530/1130	*		US	US Treasury Auction Result for Cash Management Bill
23/07/2024	1700/1300	*		US	US Treasury Auction Result for 2 Year Note
24/07/2024	2300/0900	***		AU	Judo Bank Flash Australia PMI