MNI ASIA OPEN: Cross-Current Positioning Ahead FOMC

EXECUTIVE SUMMARY

• 45 COUNTERPARTIES TAKE $509.6B AT FED'S FIXED-RATE REVERSE REPO, Bbg
• CUOMO LIFTS NY PANDEMIC LIMITS WITH 70% VACCINE BENCHMARK MET, Bbg
• EU TO RAISE 20B EUROS FROM DEBUT BOND TO FUND RECOVERY PROGRAM, Bbg
• EU, U.S. REACH DEAL TO RESOLVE BOEING-AIRBUS TRADE DISPUTE, Bbg

US TSY SUMMARY: Decent Action on Narrow Range Ahead Wed's FOMC

Tsys hold mildly weaker levels by Tuesday's close, holding to a narrow range in the lead-up to Wednesday's FOMC policy annc. Some early post-data chop preceded some brief action following the Tsy 20Y bond auction.

• Choppy post data trade as upward revisions (+0.9%) to Apr softened May retail sales miss ( -1.3%), PPI beat exp (+0.8%). Knee jerk reaction pushed futures near top end overnight range before rates sold off, extending session low slightly. Sources reported decent two-way trade volumes as fast$, prop accts buying 5s and 10s, bank selling 10s and 30s.
• Tsys futures pared loess after strong $24B 20Y auction re-open: drawing a high yield of 2.120% (2.286% last month) vs. 2.137% WI. Bid-to-cover 2.4 vs. 2.24 in May.
• Indirect take-up climbed to 62.07% (highest since October 2020) vs. 56.72% in May. Primary dealer take-up falls to lowest in over a year to 17.53% vs. 23.75.51% prior. Direct take-up 20.40% vs. 19.51% prior.
• Another decent day for corporate issuance with foreign banks issuing $8.8B after Mon's $9.35B.
• The 2-Yr yield is up 0.8bps at 0.165%, 5-Yr is up 0.2bps at 0.7838%, 10-Yr is up 0.3bps at 1.4973%, and 30-Yr is up 1.5bps at 2.1975%.

US/RUSSIA: Putin-Biden Meeting Starts Tomorrow 0700ET/1300CET

Following on from Josh Wingrove's confirmation of the expected duration of the Putin-Biden summit tomorrow, Bloomberg's Jennifer Jacobs tweets: "Biden's meetings with Putin and the Russians begin at tomorrow at 1 p.m. local in Geneva (7 a.m. in DC) and will stretch into the afternoon."

Durations of the summit in various time zones:

• US West Coast: 0400-0800/0900
• US East Coast: 0700-1100/1200
• UK: 1200-1600/1700
• Western Europe: 1300-1700/1800
• Moscow: 1400-1800/1900
• Hong Kong: 1900-2200/2300

OVERNIGHT DATA

• US MAY RETAIL SALES -1.3%; EX-MOTOR VEH -0.7%
  
• US APR RETAIL SALES REVISED +0.9%; EX-MV +0.0%
• US MAY RET SALES EX GAS & MTR VEH & PARTS DEALERS -0.8% V APR +0.1%
• US MAY RET SALES EX MTR VEH & PARTS DEALERS -0.7% V US MAY +0.0%
• US MAY RET SALES EX AUTO, BLDG MATL & GAS -0.3% V APR +0.3%

• US MAY FINAL DEMAND PPI +0.8%, EX FOOD, ENERGY +0.7%
• US MAY FINAL DEMAND PPI EX FOOD, ENERGY, TRADE SERVICES +0.7%
• US MAY FINAL DEMAND PPI Y/Y +6.6%, EX FOOD, ENERGY Y/Y +4.8%
• US MAY PPI: FOOD +2.6%; ENERGY +2.2%
• US MAY PPI: GOODS +1.5%; SERVICES +0.6%; TRADE SERVICES +0.7%

• US NY FED EMPIRE STATE MFG INDEX 17.4 JUN
• US NY FED EMPIRE MFG NEW ORDERS 16.3 JUN
• US NY FED EMPIRE MFG EMPLOYMENT INDEX 12.3 JUN
• US NY FED EMPIRE MFG PRICES PAID INDEX 79.8 JUN

• US REDBOOK: JUN STORE SALES +15.4% V YR AGO MO
• US REDBOOK: STORE SALES +16.4% WK ENDED JUN 12 V YR AGO WK
• US REDBOOK: WILL RESUME MONTH-TO-MONTH DATA COMPARISON IN FEB 2022

• US MAY INDUSTRIAL PROD +0.8%; CAP UTIL 75.2%
• US APR IP REV TO +0.1%; CAP UTIL REV 74.6%
• US MAY MFG OUTPUT +0.9%

• US APR BUSINESS INVENTORIES -0.2%; SALES +0.6%
• US APR RETAIL INVENTORIES -1.8%

• US NAHB HOUSING MARKET INDEX 81 IN JUN
• US NAHB JUN SINGLE FAMILY SALES INDEX 86; NEXT 6-MO 79

MARKETS SNAPSHOT

Key late session market levels

• DJIA down 51.97 points (-0.15%) at 34327.64
• S&P E-Mini Future down 4 points (-0.09%) at 4239.75
• Nasdaq down 95.6 points (-0.7%) at 14070.97
• US 10-Yr yield is up 0.3 bps at 1.4973%
• US Sep 10Y are up 0.5/32 at 132-17
• EURUSD up 0.0004 (0.03%) at 1.2124
• USDJPY up 0.02 (0.02%) at 110.09
• WTI Crude Oil (front-month) up $1.27 (1.79%) at $72.16
• Gold is down $8.58 (-0.46%) at $1857.63

European bourses closing levels:

• EuroStoxx 50 up 10.85 points (0.26%) at 4143.52
• FTSE 100 up 25.8 points (0.36%) at 7172.48
• German DAX up 55.88 points (0.36%) at 15729.52
• French CAC 40 up 23.17 points (0.35%) at 6639.52

US TSY FUTURES CLOSE

• 3M10Y +0.335, 147.449 (L: 145.337 / H: 148.887)
• 2Y10Y -0.271, 133.029 (L: 131.976 / H: 134.583)
• 2Y30Y +0.927, 203.05 (L: 200.932 / H: 204.721)
• 5Y30Y +1.531, 141.211 (L: 139.096 / H: 142.541)
• Current futures levels:
• Sep 2Y down 0.375/32 at 110-10 (L: 110-10 / H: 110-10.75)
• Sep 5Y steady at at 123-30 (L: 123-29 / H: 124-00.25)
• Sep 10Y steady at at 132-16.5 (L: 132-14.5 / H: 132-21)
• Sep 30Y down 2/32 at 158-17 (L: 158-09 / H: 158-31)
• Sep Ultra 30Y down 8/32 at 188-6 (L: 187-20 / H: 189-05)

US EURODOLLAR FUTURES CLOSE

• Sep 21 steady at 99.870
• Dec 21 steady at 99.815
• Mar 22 steady at 99.830
• Jun 22 +0.002 at 99.882
• Red Pack (Sep 22-Jun 23) steady to -0.01
• Green Pack (Sep 23-Jun 24) -0.01
• Blue Pack (Sep 24-Jun 25) -0.005 to +0.010
• Gold Pack (Sep 25-Jun 26) +0.015 to +0.020

Short Term Rates

US DOLLAR LIBOR: Latest Settles

• O/N +0.00075 at 0.05613% (+0.00075/wk)
• 1 Month +0.00712 to 0.08175% (+0.00888/wk)
• 3 Month +0.00675 to 0.12475% (+0.00588/wk) ** (New Record Low: 0.11800% on 6/14)
• 6 Month +0.00225 to 0.15262% (+0.00012/wk)
• 1 Year -0.00425 to 0.23325% (-0.00613/wk)

• Daily Effective Fed Funds Rate: 0.06% volume: $58B
• Daily Overnight Bank Funding Rate: 0.04% volume: $251B

• Secured Overnight Financing Rate (SOFR): 0.01%, $877B
• Broad General Collateral Rate (BGCR): 0.01%, $367B
• Tri-Party General Collateral Rate (TGCR): 0.01%, $346B
• (rate, volume levels reflect prior session)

• TIPS 7.5Y-30Y, $1.201B accepted vs. $2.335B submission
• Next scheduled purchases:
• Wed 6/16 ---- Buy-op paused for FOMC rate annc
• Thu 6/17 1010-1030ET: Tsy 22.5Y-30Y, appr $2.025B
• Fri 6/18 1010-1030ET: Tsy 7Y-10Y, appr $3.225B

PIPELINE: CIBC, Toyota Launched

• Date $MM Issuer (Priced *, Launch #)
• 06/15 $2.5B #CIBC $1.25B 2Y +30, $500M 2Y FRN SOFR +34, $750M 5Y +50
• 06/15 $2.25B #Macquarie Group $950M 6.25NC5.25 +85, $300M 6.25NC5.25 FRN SOFR+92, $1B 11NC10 +120
• 06/15 $1.8B #Toyota Motor Cr $850M 3Y +20, $350M 3Y FRN SOFR+26, $600M 5Y +35
• 06/15 $1B #ANZ Bank of New Zealand 5Y +50
• 06/15 $750M #Crown Castle Int 10Y +103
• 06/15 $500M #Kommunalbanken 2Y +0
• 06/15 $Benchmark Rep of Turkey 5Y Sukuk 5.25%a

EGBs-GILTS CASH CLOSE: Big NGEU Issuance Sets Bearish Tone

A huge debut 10-Yr NextGenerationEU syndication set a bearish tone for Tuesday's session, with core FI weaker in a broadly risk-on session.

• Bunds sold off as it was announced the NGEU size would be the maximum E20bln, which was double most expectations (on books >E142bln).
• Apart from that we had bond supply from the UK (Gilts, GBP7.75bn), Germany (Schatz, EUR4.068bn allotted) and Finland (RFGBs, EUR1.417bn).
• Gilts traded mixed; Periphery spreads tighter.
• UK employment / earnings data impressed; final CPIs carried no surprises.
• Wednesday sees UK May inflation data, Gilt / Bund supply, and the US Fed decision.

Closing German/UK Yields And 10-Yr Spreads To Germany

• Germany: The 2-Yr yield is up 0.1bps at -0.672%, 5-Yr is up 1.2bps at -0.603%, 10-Yr is up 1.9bps at -0.232%, and 30-Yr is up 1.5bps at 0.322%.
• UK: The 2-Yr yield is up 0.9bps at 0.08%, 5-Yr is up 1.7bps at 0.331%, 10-Yr is up 1.7bps at 0.758%, and 30-Yr is down 0.2bps at 1.276%.
• Italian BTP spread down 1bps at 102bps / Spanish spread down 0.3bps at 64.1bps

FOREX: Softer US Equities Prompt Risk-Tied Currencies To Fade

• With major US equity indices edging lower, risk tied currencies lost ground while major pairs remained broadly unchanged.
• Losses were concentrated in AUD, NZD and CAD, all retreating by around 0.4%.
• EURUSD and USDJPY were little changed from Monday's close and due to their weighting, the DXY held an extremely tight range during the US session on Tuesday. The Bloomberg dollar index, however, strengthened 0.2%, aided by a broad sell-off in emerging market FX.
• Despite the gains in oil, USDCAD continued it's gradual bounce off 1.20 support and matched key resistance at 1.2203 today. For bulls, clearance of 1.2203, would instead signal a short-term technical base and the potential for a stronger corrective bounce.
• GBPUSD briefly broke through most recent lows around 1.4070, prompting a quick bout of selling which brought the pair down to lows of 1.4034, just below key support at the 50-day EMA at 1.4039. The dip ran into solid demand and a quick 50 pip recovery ensued.
• Both the UK and Canada will release their respective CPI data tomorrow.
• The focus, however, is undoubtedly on tomorrow's Fed meeting, where Chair Powell will likely make it clear that the FOMC is not yet ready to move any further than just talking about reducing asset purchases.