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MNI ASIA MARKETS ANALYSIS: Ylds Lower Ahead Nov FOMC Minutes


HIGHLIGHTS

  • MNI US: White House Open To Raising Debt Ceiling During "Lame Duck" Congress
  • MNI US: McCarthy's Pathway To Speaker's Gavel Not Straightforward
  • GEORGE: FED BUYING OF MBS MAY HAVE HELPED TO LIFT HOUSE PRICES, Bbg
  • WHITE HOUSE TO EXTEND STUDENT LOAN REPAYMENT HALT UP TO JUNE 30, Bbg
Key links: MNI: BOC Says Hikes Starting To Work, Long Way From CPI Goal / MNI RIKSBANK WATCH: A 75BP Hike Expected As Cycle Peak Nears / US Treasury Auction Calendar / US$ Credit Supply Pipeline

US TSYS: Ylds Lower, Curves Bull Fatten Ahead Wed's Nov FOMC Minutes

Tsys stronger, near late session highs after the bell, yield curves bull-flattening to new all-time lows (2s10s -76.451), 30YY slip to 3.8153% low.

  • KC Fed President Esther George Tuesday said the large savings buffer Americans possess is likely to require higher interest rates to keep a lid on consumer spending.
  • "High savings is likely to provide momentum to consumption and require higher interest rates," she said in remarks at a conference held by the Central Bank of Chile, estimating Americans continue to hold on to USD2.3 trillion in excess savings relative to pre-pandemic levels.
  • Heavy overall volumes, TYZ2 appr 3M - tied to Dec/Mar rolling ahead Wed, Nov 30 first notice (Mar24 takes lead), over 1.9M TYZ/TYH spds trade after the close makes appr 1.1M not roll-tied, average volumes.
  • Tsys pare gains after $35B 7Y note auction (91282CFY2) tail: 3.890% high yield vs. 3.862% WI; 2.33x bid-to-cover vs. 2.43x last month.
  • Reminder: Weekly jobless claim rolled to Wednesday due to Thursday's Thanksgiving Holiday mkt close (followed by early noon close Fri, Globex at 1215ET, NYSE and Nasdaq at 1300ET). Note on Tsy bill auctions: competitive closing time for 4- and 8W bills earlier than the usual 1130ET to 1000ET, followed by 17W bill auction at 1130ET.

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

  • O/N +0.00700 to 3.81843% (+0.00629/wk)
  • 1M +0.03714 to 4.01614% (+0.05943/wk)
  • 3M +0.00685 to 4.69871% (+0.03385/wk) * / **
  • 6M -0.00943 to 5.16214% (+0.01943/wk)
  • 12M +0.01300 to 5.57886% (+0.06943/wk)
  • * Record Low 0.11413% on 9/12/21; ** New 14Y high: 4.69871% on 11/22/22
STIR: FRBNY EFFR for prior session:
  • Daily Effective Fed Funds Rate: 3.83% volume: $94B
  • Daily Overnight Bank Funding Rate: 3.82% volume: $281B
US TSYS: Repo Reference Rates
  • Secured Overnight Financing Rate (SOFR): 3.80%, $1.015T
  • Broad General Collateral Rate (BGCR): 3.76%, $404B
  • Tri-Party General Collateral Rate (TGCR): 3.76%, $395B
  • (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Federal Reserve/MNI

NY Fed reverse repo usage recedes to $2,103.932B w/ 92 counterparties vs. $2,125.426B in the prior session. Prior record high stands at $2,425.910B on Friday, September 30.

EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY

  • SOFR Options:
    • 20,000 SFRH4 97.00/98.00 call spds, 16.5 vs. 95.85/0.14%
    • +10,000 SFRU3 96.00/97.00 call spds w/ SFRZ3 96.50/97.50 call spd strip, 26.75 total
    • Block, total 20,000 SFRZ2 95.31/95.43 call spds, 9.75 ref 95.4275
    • Block, total +10,000 SFRZ2 95.31/95.37/95.43/95.50 call condors, 2.0
    • +5,000 SFRZ3 97.00/98.00 call spds, 9.25 ref
    • Block, 4,444 SFRU3 97.00/98.00 call spds, 4.5
    • Block, 3,870 SFRH4 97.00/98.00 call spds, 15.5
    • 2,200 SFRG3 94.25/94.75/95.00 broken put flys
    • Block, total 5,500 SFRF3 95.06/95.12/95.18/95.25 call condors, 0.75
    • 2,100 SFRH3 95.25/95.50/95.75 call flys
  • Eurodollar Options:
    • 3,000 Dec 95.00/95.12 call spds
  • Treasury Options:
    • 3,600 TYH3 117.5 calls, 25
    • 2,100 TYG 115/118 call spds

EGBs-GILTS CASH CLOSE: Constructive Pre-PMI Session

Bunds and Gilts advanced modestly Tuesday for the 2nd consecutive session in light trade.

  • Bank of Lithuania Pres Simkus told MNI that the ECB "definitely need a 50bps hike" at the December meeting, but asked "do we need 75bps?", calling it premature to make that judgment.
  • Eurozone Nov consumer confidence was weak but slightly beat expectations.
  • GGBs outperformed - while it wasn't a market-mover, they were underpinned by the EU's finding that Greece has done enough to qualify for the final disbursement of debt relief.
  • Attention turns to flash PMI data Wednesday morning.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 0.9bps at 2.11%, 5-Yr is down 1bps at 1.963%, 10-Yr is down 1.6bps at 1.978%, and 30-Yr is down 2.1bps at 1.89%.
  • UK: The 2-Yr yield is down 4.6bps at 3.142%, 5-Yr is down 5.3bps at 3.221%, 10-Yr is down 4.9bps at 3.137%, and 30-Yr is up 0.9bps at 3.316%.
  • Italian BTP spread down 1.1bps at 193.5bps / Greek down 1.5bps at 226bps

EGB Options: OTM Bund And Bobl Put Fly Closing Feature

Tuesday's Europe rates / bond options flow included:
  • OEH3 116.50/116.00 put spread bought for 12 in 5k
  • OEG3 118.75/118.25/117.25p fly sold at 3 in 10k (closing)
  • RXG3 135/133/132p fly bought for 25 in 1k
  • RXG3 122p, bought for 9 and 9.5 in 5.5k (OTM; Underlying trades at 139.26)
  • RXG3 139.5/136.5 put spread sold at 117.5 in 4.3k
  • ERZ2 97.75/97.625ps 1x1.5, bought the 1 for 1.75 in 2.5k

FOREX: USD Continues To Weaken Approaching APAC Crossover

  • The greenback spent the majority of Tuesday’s session reversing Monday’s advance, weakening steadily amid a more positive risk backdrop as both equity and commodity indices posted solid gains.
  • The USD index has risen 0.65% and resides just 30 pips below Friday’s close with the World Cup and the Thanksgiving holiday likely capping the momentum for any sizable adjustments in currency markets.
  • Broad greenback weakness was led by USD/CNH backtracking in early European / late Asia-Pac hours, putting the pair back below the 50-dma, narrowing the gap towards 7.1031, the 50% retracement for the Nov 14 - Nov 21 upleg.
  • The Norwegian Krone is the strongest in G10 amid supportive price action in crude futures following the strong bounce late Monday. Additionally, NZD is on the front foot, with markets again posturing ahead of the RBNZ decision on Wednesday where the bank is expected to raise rates by a further 75bps to 4.25%.
  • 0.6206 and 0.6251 represent the nearest levels of note on the topside for NZDUSD, with the latter representing the three-month high for the pair.
  • As well as the RBNZ decision, flash Eurozone PMIs will be in the spotlight before US durable goods, new home sales and UMich sentiment data. The FOMC minutes caps off the Wednesday docket. Sell-side analysts mostly see risks to the minutes as leaning hawkish, at the very least cementing expectations for an upgrade to the median 2023 dot in December's next SEP vs September's editions.

FX: Expiries for Nov23 NY cut 1000ET (Source DTCC)

  • EUR/USD: $0.9700(E1.5bln), $0.9750(E1.5bln), $1.000-10(E766mln), $1.0050(E1.3bln), $1.0280(E756mln), $1.0300(E1.3bln), $1.0350(E805mln)
  • USD/JPY: Y140.00($900mln), Y141.75-00($1.3bln), Y144.50-70($2.7bln)
  • USD/CNY: Cny7.05-07($1.2bln)

Late Equity Roundup: Buoyed by Strong Energy Sector

Stock indexes quietly drifting near session highs, levels not seen in SPX since Nov 16, buoyed by a carry-over strength in Energy sector. S&P E-Minis outlook remains bullish. Recent consolidation in the daily chart appears to be a bull flag formation - a continuation pattern. This reinforces a bull theme.

  • SPX eminis currently trade +37.75 (0.95%) at 3995.5; DJIA +320.58 (0.95%) at 34019.68; Nasdaq +87.7 (0.8%) at 11111.69.
  • SPX leading/lagging sectors: Energy sector (3.01%) w/ energy equipment makers/services matched w/ oil & gas drillers/refiner names (MPC +5.28%, HES +5.11%, APA +5.10%, OXY +4.12%). Materials (+1.80%) and Information Technology (+1.37%) follow. Laggers: Real Estate (+0.06%), Industrials (+0.58%), Consumer Staples (+0.60%).
  • Dow Industrials Leaders/Laggers: Home Depot (HD) +8.40 at 325.18, United Health (UNH) +5.78 at 522.97, Chevron (CVX) +4.62 at 185.86. Laggers: Amgen (AMGN) -2.99 at 285.17, Disney (DIS) -2.33 at 95.25, Boeing (BA) -1.36 at 171.64.

E-MINI S&P (Z2): Bull Flag Formation

  • RES 4: 4175.00 High Sep 13 and a key resistance
  • RES 3: 4146.63 76.4% retracement of the Aug 16 - Oct 13 downleg
  • RES 2: 4100.00 Round number resistance
  • RES 1: 4050.75 High Nov 15
  • PRICE: 3999.0 @ 1440 ET Nov 22
  • SUP 1: 3865.69 50-day EMA
  • SUP 2: 3750.00 Low Nov 9
  • SUP 3: 3704.25 Low Nov 3 and key short-term support
  • SUP 4: 3641.50 Low Oct 21

The S&P E-Minis outlook remains bullish. Recent consolidation in the daily chart appears to be a bull flag formation - a continuation pattern. This reinforces a bull theme. Furthermore, recent gains resulted in a break of 3928.00, Nov 1 high, establishing a positive price sequence of higher highs and higher lows. The focus is on 4100.00 next. Initial firm support lies at 3865.69, the 50-day EMA.

Oil Supply Tightness Outweighs Demand Concerns, Russia Price Cap Proposals Eyed

  • A mixed session for crude oil but with demand concerns offset by sufficient upside momentum from OPEC members remaining committed to production targets with denial of reports of a 500kbpd increase at the next meeting on Dec 4 along with a weaker USD on the day.
  • Weaker momentum later in the session as the EU looks to soften the Russian oil price cap plan in proposals potentially agreed and announced tomorrow (per Bloomberg), coming after the G7 were seen proposing a $60-70/bbl price range (per WSJ).
  • WTI (CLF3) is +1.4% at $81.19 having come close to probing resistance at $82.43 (Nov 18 high) before retreating. Key medium-term support is still seen at $74.96 (Sep 28 low).
  • Brent is +1.2% at $88.49, having also come close to testing resistance at $90.63 (Nov 18 high) whilst support remains at $82.31 (Nov 21 low).
  • Gold is -0.03% at $1737.50, not troubling resistance at $1786.5 (Nov 15 high, bull trigger) or support at $1718.6 (20-day EMA).

Wednesday Data Calendar

DateGMT/LocalImpactFlagCountryEvent
23/11/20220930/0930***UKIHS Markit Manufacturing PMI (flash)
23/11/20220930/0930***UKIHS Markit Services PMI (flash)
23/11/20220930/0930***UKIHS Markit Composite PMI (flash)
23/11/20221000/1000**UKGilt Outright Auction Result
23/11/20221200/0700**USMBA Weekly Applications Index
23/11/20221330/0830*CAQuarterly financial statistics for enterprises
23/11/20221330/0830**USJobless Claims
23/11/20221330/0830**USdurable goods new orders
23/11/20221445/0945***USIHS Markit Manufacturing Index (flash)
23/11/20221445/0945***USIHS Markit Services Index (flash)
23/11/20221500/1000***USNew Home Sales
23/11/20221500/1000***USFinal Michigan Sentiment Index
23/11/20221530/1030**USDOE weekly crude oil stocks
23/11/20221700/1200**USNatural Gas Stocks
23/11/20221900/1400USFOMC minutes
23/11/20221900/1900UKBOE Pill Speech at Beesley Lecture Series
23/11/20222130/1630CAGovernor Macklem testifies at House finance committee

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