MNI ASIA OPEN: $25B Verizon Mega-Deal Out-Subscribes 30Y Bond

EXECUTIVE SUMMARY

• MNI EXCLUSIVE: Fed 'Dots' To Shift Into 2022 and 2023
• MNI REALITY CHECK: Canada Job Market Frayed by Supply Upheaval
• ECB Lagarde: We're Not Doing Yield Curve Control

US

FED: More Fed officials next week are set to forecast interest rates lifting away from zero by 2023, sooner than they expected in December and potentially complicating Fed Chair Jay Powell's message that policy will stay ultra accommodative until the economy is far along the road to recovery, former officials told MNI.

• The FOMC's December forecasts featured only one official penciling in a rate rise next year while five saw hikes in 2023. But they factored in very little of the impact of the USD1.9 trillion spending bill just approved, adding to the USD900 billion relief delivered late December, or of the accelerating vaccine rollout. Analysts now expect potentially record-shattering growth and higher inflation in 2021. For more see MNI Policy main wire at 0933ET.

CANADA

CANADA: Canadian industry leaders told MNI the job market will remain challenged by disruptions to supply chains and health restrictions that are hurting demand for some products and making it hard to bring in workers for industries that want to expand.

• Employment may rise by 100,000 in February to offset just part of the 266,000 jobs lost in the prior two months during the second wave of Covid-19 lockdowns. The unemployment rate is also expected to decline to 9.2% from 9.4% in a Statistics Canada report due Friday at 830am EST. For more see MNI Policy main wire at 1527ET

OVERNIGHT DATA

• US JOBLESS CLAIMS -42K TO 712K IN MAR 06 WK
  
• US PREV JOBLESS CLAIMS REVISED TO 754K IN FEB 27 WK
• US CONTINUING CLAIMS -0.193M to 4.144M IN FEB 27 WK

• US BLS: JOLTS QUITS RATE 2.3% IN JAN

MARKETS SNAPSHOT

• DJIA up 237.41 points (0.74%) at 32594.98
• S&P E-Mini Future up 46.75 points (1.2%) at 3940
  
• Nasdaq up 330 points (2.5%) at 13409.75
• US 10-Yr yield is up 0.7 bps at 1.5248%
• US Jun 10Y are up 2.5/32 at 132-19.5
• EURUSD up 0.0054 (0.45%) at 1.1982
• USDJPY up 0.07 (0.06%) at 108.45
• WTI Crude Oil (front-month) up $1.59 (2.47%) at $66.02
• Gold is down $1.87 (-0.11%) at $1723.66

European bourses closing levels:

• EuroStoxx 50 up 25.72 points (0.67%) at 3845.64
• FTSE 100 up 11.36 points (0.17%) at 6736.96
• German DAX up 29.14 points (0.2%) at 14569.39
• French CAC 40 up 43.21 points (0.72%) at 6033.76

US TSY SUMMARY: $25B Verizon Mega-Deal Outstrips 30Y Bond Auction

• Tsy futures traded lower post-wkly claims (712k vs. 725k est), had already trimmed knock-on gains tied to rally in EGBs post ECB annc: left rate, refi and marginal lending steady while Bunds surged on faster purchase pace of PEPP. Decent two-way in TYM after better buyers. Large 2s5s steepener Block: +12,619 TUM, 110-23.38, post-time offer at 0927:23ET vs. -10,275 FVM 124-00.25 through the 124-00.5 bid.
• Sideways rate trade (as equities powered higher, ESH1 +45.0 late) as markets prepared to absorb $24B 30Y bond auction re-open. Massive $25B Verizon mega-deal: 9-tranche issue had many guessing after first caught wind of it late Wed. Size not know (rumored only) until after the bond auction that drew 2.295% high yield (1.933% last month) vs. 2.290% WI; w/ 2.28 bid/cover.
• Huge $25B 9pt issue at the low end of the estimate, appears some prop/fast$ accounts had anticipated larger issuance and had sold along with hedges -- contributed to the bounce in Tsys after the 30Y Bond R/O auction tailed slightly.
• Speaking of supply: US Treasury responding to the passage of the $1.9T Covid relief package by increasing next weeks 13W and 26W bill auctions by $3B each, the 42D CMB by $5B.
• The 2-Yr yield is down 1.4bps at 0.1389%, 5-Yr is down 1.6bps at 0.773%, 10-Yr is up 0.7bps at 1.5248%, and 30-Yr is up 3.5bps at 2.273%.

US TSY FUTURES CLOSE: Yld Curves Re-Steepening

Tsys trade mixed after the bell, yield curves steeper (5s30s cracked 150.0) with the long end weaker all session.

• 3M10Y +1.733, 149.454 (L: 142.977 / H: 151.019)
• 2Y10Y +2.614, 138.713 (L: 132.797 / H: 139.308)
• 2Y30Y +6.337, 214.467 (L: 206.61 / H: 215.112)
• 5Y30Y +5.667, 150.243 (L: 145.171 / H: 150.95)
• Current futures levels:
• Jun 2Y up 1/32 at 110-12.75 (L: 110-11.5 / H: 110-13.125)
• Jun 5Y up 1.5/32 at 123-31.5 (L: 123-28 / H: 124-07.25)
• Jun 10Y up 1/32 at 132-18 (L: 132-12.5 / H: 133-00.)
• Jun 30Y down 14/32 at 157-23 (L: 157-12 / H: 158-28)
• Jun Ultra 30Y down 1-21/32 at 186-5 (L: 185-28 / H: 189-01)

US EURODOLLAR FUTURES CLOSE: Steady/Mixed

Lead quarterly EDH1 weaker; 3M LIBOR set -0.00025 to 0.18388% (-0.00150/wk)

• Mar 21 -0.0025 at 99.815
• Jun 21 steady at 99.835
• Sep 21 steady at 99.815
• Dec 21 +0.005 at 99.765
• Red Pack (Mar 22-Dec 22) +0.005 to +0.010
• Green Pack (Mar 23-Dec 23) -0.01 to steady
• Blue Pack (Mar 24-Dec 24) steady to +0.015
• Gold Pack (Mar 25-Dec 25) steady to +0.010

Short Term Rates

US DOLLAR LIBOR: Latest settles:

• O/N +0.00088 at 0.07813% (+0.00050/wk)
• 1 Month +0.00012 to 0.10600% (+0.00275/wk)
• 3 Month -0.00025 to 0.18388% (-0.00150/wk) (Just above Record Low of 0.17525% on 2/19/21)
• 6 Month -0.00088 to 0.19275% (-0.00313/wk)
• 1 Year -0.00138 to 0.27725% (-0.00050/wk)

• Daily Effective Fed Funds Rate: 0.07% volume: $66B
• Daily Overnight Bank Funding Rate: 0.07%, volume: $228B

• Secured Overnight Financing Rate (SOFR): 0.02%, $914B
• Broad General Collateral Rate (BGCR): 0.01%, $365B
• Tri-Party General Collateral Rate (TGCR): 0.01%, $344B
• (rate, volume levels reflect prior session)

• Fri 3/12 1010-1030ET: Tsy 0Y-2.25Y, appr $12.825B
• Mon 3/15 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
• Tue 3/16 1010-1030ET: Tsy 4.5Y-7Y, appr $6.025B
• Wed 3/17 No buy operation due to FOMC
• Thu 3/18 1010-1030ET: Tsy 20Y-30Y, appr $1.750B
• Fri 3/19 1010-1030ET: TIPS 1Y-7.5Y, appr $2.425B

PIPELINE: $25B Verizon Mega-Deal Launched

Huge $25B 9pt issue at the low end of the estimate, appears some prop/fast$ accounts had anticipated larger issuance and had sold along with hedges -- contributed to the bounce in Tsys after the 30Y Bond R/O auction tailed slightly. Verizon holds record of largest debt launch ever at $49B total in August 2013.

• Date $MM Issuer (Priced *, Launch #)
• 03/11 $1.75B #Verizon 3Y +45, $750M 3Y FRN SOFR+50
• 03/11 $2.75B #Verizon 5Y 70, $750M FRN SOFR+79
• 03/11 $3B #Verizon 7Y +90
• 03/11 $4.25B #Verizon 10Y +107
• 03/11 $3.75B #Verizon 20Y +120
• 03/11 $4.5B #Verizon 30Y +130
• 03/11 $3.5B #Verizon 40Y +145

FOREX: Dollar Sold as Equity Hotstreak Continues

• The USD suffered Thursday, firstly in response to the ECB rate decision, in which the ECB made clear that an accelerated pace of PEPP purchases did not mean more stimulus was forthcoming. The greenback came under further pressure after the London close, however, following the 30y auction, in which a small yield tail at auction resulted in 10y yields dropping 3bps, pulling the rug out from under the USD index.
• Equities traded firmly throughout, with US indices narrowing the gap with all time highs. The e-mini S&P traded 10 points shy of the record highs posted in February, a move that coincided with EUR/JPY making a test on 2021's best levels - which mark a three year high for the cross.
• The upcoming Bank of Japan meeting (next week) is still a focus, with source reports this morning further suggesting the board could tweak their yield curve control approach as part of their policy review. JPY was one of the sole currencies to underperform the USD Thursday.
• Focus Friday turns to UK industrial and manufacturing production data, the Canadian jobs report for February and US PPI. There are no central bank speakers of note.

EGBs-GILTS CASH CLOSE: BTPs Soar As ECB Set To Pick Up The Pace

The ECB announced Thursday that it would significantly increase the pace of purchases under its PEPP programme from tomorrow. EGBs rallied, but the final impact was mixed.

• 10-Yr Bund yields dropped 4.4bps following the decision statement, but the fall was pared to just 1.8bps by the end of Lagarde's press conference. Conversely, BTP spreads led the periphery rally, falling sharply and continuing to compress over the rest of the session.
• Reuters sources story post-ECB said the PEPP monthly buying target "well above" E60bn, but <E100bn (implying between E15-25bn of weekly buys): ECB's been buying avg ~E14bn a week so far in 2021.
• Earlier in the session, Italy and Ireland sold E1.5bn and E8bn in bonds, respectively.
• Gilt yields ended the day higher. Attention first thing Friday will be on UK GDP figures.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is down 0.9bps at -0.691%, 5-Yr is down 1.6bps at -0.632%, 10-Yr is down 2.1bps at -0.334%, and 30-Yr is down 0.3bps at 0.181%.
• UK: The 2-Yr yield is up 1.4bps at 0.08%, 5-Yr is up 0.8bps at 0.327%, 10-Yr is up 2.1bps at 0.735%, and 30-Yr is up 3.1bps at 1.26%.
• Italian BTP spread down 5.3bps at 93.5bps / Spanish spread down 3.5bps at 63bps