MNI ASIA OPEN: Carry-Over Risk Appetite

EXECUTIVE SUMMARY

• BIDEN ADMIN EXTENDS PAUSE ON STUDENT LOAN PAYMENTS TO MAY 1, AP, Bbg
• WHITE HOUSE SAYS BIDEN TESTED NEGATIVE FOR COVID-19 ON WEDNESDAY, Bbg
• PFIZER PILL CLEARED BY U.S. BECOMING FIRST AT-HOME COVID DRUG, Bbg
• ECB LAGARDE: NOT QUITE THERE ON MEETING ECB INFLATION GOAL, Bbg
  
• OMICRON HOSPITAL RISK TWO-THIRDS BELOW DELTA: SCOTTISH STUDY, Bbg

US

DATA REACT: US GDP Revised Up In Q3, Slightly Lower Savings

• Whilst increasingly old data, the third Q3 GDP release was revised up again with real GDP growth at 2.3% Q/Q SAAR, from 2.0% and 2.1% in the first and second releases.
  
• It was however helped by a slightly larger than first thought dip in the personal savings ratio, from 10.9% to a still elevated 9.5% (latest monthly data show it continued to fall to 7.3% in Oct).
  
• The largest quarterly drivers came from professional services, finance & insurance and non-federal government.
  
• With Delta peaking in the middle of the quarter, retail trade saw the largest hit to GDP but accommodation & food services and other leisure-related sectors were surprisingly solid.
  
• Treasuries saw a muted reaction on the release, rallying 0.5-1bp.

• Consumer confidence was stronger than expected in the Conference Board survey for Dec, with expectations up whilst the present situation was largely unchanged from an upward revised Nov, despite the emergence of Omicron (survey cut-off Dec 16).
• Details suggest a similar labour market narrative to Nov. 55.1% of consumers said jobs were “plentiful” (from 55.5%, still historically strong) whilst 25% expect more jobs to be available in the coming months vs 15% anticipating fewer.
• Also of note: “The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.”
• “Meanwhile, concerns about inflation declined after hitting a 13-year high last month as did concerns about COVID-19, despite reports of continued price increases and the emergence of the Omicron variant”.
• Another muted reaction from Treasuries, selling off ~1bp.

US TSYS: Carry-Over Risk Appetite, Covid Headline Generally Upbeat

• Very light volumes on the last full session of the week (TYH2 <660k after the bell), early exit Thu, Fri closed for Christmas eve. (Next week, market closes early for New Years Eve Fri).
• Appetite for risk carried over from prior session with stock near highs in late trade (ESH2 +33.5 at 4674.0, 4678.5 high), West Texas crude gained 1.68 to 72.80 after an unexpected inventory drawdown.
• Limited react to data to positive data: US GDP Revised Up In Q3 (2.3% Q/Q SAAR), slightly lower savings; stronger than exp Consumer Conf unphased by Omicron variant (115.8; EST. 111.0). On tap Thu: wkly claims, PCE Durables, U-Mich and existing home sales. NY Fed buy-ops on hold, resume Jan 3.
• Wed focus more on upbeat Covid headlines: OMICRON HOSPITAL RISK TWO-THIRDS BELOW DELTA: SCOTTISH STUDY; PFIZER PILL CLEARED BY U.S. BECOMING FIRST AT-HOME COVID DRUG, Bbg. Meanwhile, US Pres Biden tested negative for virus after coming in close contact w/carrier earlier in wk.
• US Tsy $17B 5Y TIPS auction tailed 2bp w/-1.508% high yield.
• The 2-Yr yield is up 0bps at 0.6667%, 5-Yr is up 0.5bps at 1.2205%, 10-Yr is down 0.5bps at 1.4566%, and 30-Yr is down 0.9bps at 1.8538%.

OVERNIGHT DATA

• US Q3 GDP +2.3%

• US NAR: NOV EXISTING HOME SALES +1.9% TO 6.46M SAAR
• NAR'S YUN: EXPECT HOME SALES TO FALL NEXT YEAR, PRICES TO RISE

• U.S. DEC. CONSUMER CONFIDENCE AT 115.8; EST. 111.0

MARKETS SNAPSHOT

Key late session market levels:

• DJIA up 184.11 points (0.52%) at 35671.69
• S&P E-Mini Future up 31.75 points (0.68%) at 4672.25
• Nasdaq up 123.8 points (0.8%) at 15463.94
• US 10-Yr yield is down 0.5 bps at 1.4566%
• US Mar 10Y are up 4.5/32 at 130-22.5
• EURUSD up 0.0047 (0.42%) at 1.1332
• USDJPY up 0.06 (0.05%) at 114.16
• Gold is up $14.84 (0.83%) at $1804.00

• EuroStoxx 50 up 42.07 points (1.01%) at 4217.06
• FTSE 100 up 44.25 points (0.61%) at 7341.66
• German DAX up 146.03 points (0.95%) at 15593.47
• French CAC 40 up 86.68 points (1.24%) at 7051.67

US TSY FUTURES CLOSE

• 3M10Y -0.339, 138.988 (L: 136.698 / H: 140.787)
• 2Y10Y -0.364, 78.755 (L: 78.039 / H: 80.242)
• 2Y30Y -0.911, 118.301 (L: 118.166 / H: 120.85)
• 5Y30Y -1.212, 63 (L: 62.36 / H: 65.778)
• Current futures levels:
• Mar 2Y up 0.375/32 at 109-3.75 (L: 109-02.75 / H: 109-04.875)
• Mar 5Y up 1.5/32 at 121-1 (L: 120-29.5 / H: 121-04.5)
• Mar 10Y up 4.5/32 at 130-22.5 (L: 130-17 / H: 130-28.5)
• Mar 30Y up 19/32 at 161-12 (L: 160-28 / H: 161-19)

US EURODOLLAR FUTURES CLOSE

• Mar 22 +0.005 at 99.635
• Jun 22 +0.005 at 99.395
• Sep 22 +0.005 at 99.190
• Dec 22 +0.005 at 98.955
• Red Pack (Mar 23-Dec 23) steady to +0.005
• Green Pack (Mar 24-Dec 24) steady to +0.010
• Blue Pack (Mar 25-Dec 25) +0.005 to +0.010
• Gold Pack (Mar 26-Dec 26) +0.005 to +0.010

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements

• O/N -0.00238 at 0.07050% (-0.00375/wk)
• 1 Month -0.00150 to 0.10275% (+0.00025/wk)
• 3 Month -0.00462 to 0.21138% (-0.00125/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.00088 to 0.32638% (+0.01363/wk)
• 1 Year +0.01138 to 0.55338% (+0.02375/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $69B
• Daily Overnight Bank Funding Rate: 0.07% volume: $249B

• Secured Overnight Financing Rate (SOFR): 0.04%, $896B
• Broad General Collateral Rate (BGCR): 0.05%, $345B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $329B
• (rate, volume levels reflect prior session)

• Tsy 10Y-22.5Y, appr $1.601B accepted vs. $4.062B submission
• NY Fed buy-operations pause for holidays, resume Jan 3:
• Mon 01/03 1010-1030ET: Tsy 2.25Y-4.5Y, appr $6.325B vs. $7.375B prior
• Tue 01/04 1100-1120ET: TIPS 1Y-7.5Y, appr $1.525B
• Wed 01/05 1010-1030ET: Tsy 7Y-10Y, appr $2.425B vs. $2.825B prior
• Wed 01/05 1100-1120ET: Tsy 22.5Y-30Y, appr $1.825B
• Thu 01/06 1100-1120ET: TIPS 7.5Y-30Y, appr $0.925B
• Fri 01/07 1010-1030ET: Tsy 0Y-2.25Y, appr $9.325B

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $1,699.277B from 82 counterparties vs. Tuesday's $1,748.285B. New record high of $1,758.041B posted Monday, December 20.

FOREX: US Dollar Under Pressure, Cross-JPY Remains Supported

• Broad greenback weakness continued across markets as most G10 counterparts rose to their best levels of the week. The DXY is down 0.4% and completes its third consecutive daily decline, slowly eroding into last Friday’s advance.
• Outlier in this respect is the Japanese Yen which largely represents the extended bid for cross-JPY as equities extended their bounce with overall fears surrounding the Omicron variant waning. AUDJPY, NZDJPY and GBPJPY have all risen just shy of one percent.
• With the Aussie leading the charge in risk, it is worth highlighting the move away from 0.7090 short-term support, bolstering the medium-term outlook for a further recovery from a strong inflection point around 0.6995. Clearance of last week's high of 0.7224 on Dec 16 is needed to trigger a resumption of bullish activity.
• EURUSD broke a cluster of highs just above the 1.13 mark, rising to highs of 1.1342 and approaching last week’s peak at 1.1360. Key resistance, however, at 1.1383 is intact, Nov 30 high. A break of this hurdle is required to signal potential for a stronger recovery towards 1.1407 the 50-day EMA.
• Despite the looming holiday break – plenty of data for markets to assess tomorrow. Core PCE Price Index as well as durable goods headline the US calendar. In Canada, October GDP will be released.