MNI ASIA OPEN: Weak Tsy 2Y Note Sale, Short End Lags

EXECUTIVE SUMMARY

• U.K. PM NOT EXPECTED TO ANNOUNCE COVID CURBS IN ENGLAND, Press Association
  
• Russian FM: Security Talks With US to Start After Holidays, Reuters
• Fauci Says Domestic Travel Vaccination Rule Should Be Considered, Bbg
• Rusnok Says Another Czech Rate Hike ‘Quite Likely’ in February, Bbg

US TSYS: Year End Support Pushes Stocks to New All-Time High

Tsy futures traded mixed on extremely light post-Christmas holiday volumes by the close: TYH2 just over 418k, no surprise with London closed through Tuesday in observance.

• Bonds outperform all session yield curves flatter (5s30s -3.06 at 62.95), futures trading near upper half narrow range.
• Equities climb to new all-time highs, ESH2 4776.0; Gold pared early losses -0.97 at 1809.30 late; West Texas crude +1.89 at 75.68.
• Limited data: Dallas Fed Manf. Activity Index 8.1 vs. 11.8 prior
• Not much of a react to the weak 2Y sale, Tsy futures remain mixed, short end weaker after $56B 2Y note auction (91282CDR9) tailed: 0.769% high yield vs. 0.762% WI; 2.55x bid-to-cover outpaces Nov's 2.36x and well over five auction avg: 2.49x. $57B 5Y Note auction tomorrow.
• QE: NY Fed buy-operations pause for holidays, resume January 3.
• Headline watching: Russia said on Saturday it was pulling back about 10,000 troops from near the Ukrainian border in an unexpected major de-escalation, MSN.
• FT reported US will lift travel bans imposed last month on eight African countries. Foreign nationals travelling to the US from those countries will be allowed to board flights to America from midnight on December 31.
• The 2-Yr yield is up 1.9bps at 0.7069%, 5-Yr is up 0.8bps at 1.2499%, 10-Yr is down 1.2bps at 1.4807%, and 30-Yr is down 2.1bps at 1.8846%.

OVERNIGHT DATA

• US DEC. DALLAS FED MANUFACTURING INDEX AT 8.1 VS 11.8
  Dallas Fed forward guidance on next month's Mfg Index (Jan 31) remains "positive but less so in December than in November.
  
  • The future production index fell to 40.6 from 51.7, and the future general business activity index dropped 15 points to 14.0.
  • Other measures of future manufacturing activity such as capital expenditures and employment showed mixed movements but remained solidly in positive territory.

MARKETS SNAPSHOT

Key late session market levels:

• DJIA up 263 points (0.73%) at 36215.85
• S&P E-Mini Future up 54.25 points (1.15%) at 4770
• Nasdaq up 189.6 points (1.2%) at 15845.44
• US 10-Yr yield is down 1.2 bps at 1.4807%
• US Jun 10Y are down 1/32 at 130-10.5
• EURUSD up 0.0007 (0.06%) at 1.1326
• USDJPY up 0.51 (0.45%) at 114.9
• WTI Crude Oil (front-month) up $1.74 (2.36%) at $75.52
• Gold is down $1.3 (-0.07%) at $1808.83

• EuroStoxx 50 up 32.97 points (0.77%) at 4287.98
• German DAX up 78.94 points (0.5%) at 15835.25
• French CAC 40 up 53.81 points (0.76%) at 7140.39

US TSY FUTURES CLOSE

• 3M10Y +0.406, 142.068 (L: 137.665 / H: 142.411)
  
• 2Y10Y -3.245, 76.799 (L: 75.497 / H: 79.391)
• 2Y30Y -4.079, 117.221 (L: 115.849 / H: 119.988)
• 5Y30Y -3.025, 62.997 (L: 62.588 / H: 65.332)
• Current futures levels:
• Mar 2Y down 1.5/32 at 109-1 (L: 109-00.625 / H: 109-02.625)
• Mar 5Y down 2.5/32 at 120-28.25 (L: 120-26.25 / H: 120-31)
• Jun 10Y up 0.5/32 at 130-12 (L: 130-10.5 / H: 130-10.5)
• Jun 30Y up 9/32 at 162-26 (L: 162-21 / H: 162-26)

US EURODOLLAR FUTURES CLOSE

• Mar 22 steady at 99.63
• Jun 22 -0.010 at 99.380
• Sep 22 -0.010 at 99.175
• Dec 22 -0.015 at 98.935
• Red Pack (Mar 23-Dec 23) -0.02 to -0.02
• Green Pack (Mar 24-Dec 24) -0.015 to -0.01
• Blue Pack (Mar 25-Dec 25) -0.005 to +0.005
• Gold Pack (Mar 26-Dec 26) +0.010 to +0.025

SHORT TERM RATES

US DOLLAR LIBOR: No new settlement with London closed for Christmas holiday through December 28. Settlements as of Friday, December 24:

• O/N -0.00538 at 0.06975% (-0.00450 total last wk)
• 1 Month -0.00063 to 0.10125% (-0.00125 total last wk)
• 3 Month -0.00187 to 0.21788% (+0.00525 total last wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.00687 to 0.34325% (+0.03050 total last wk)
• 1 Year +0.00600 to 0.56713% (+0.03750 total last wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $69B
• Daily Overnight Bank Funding Rate: 0.08% volume: $88B

• Secured Overnight Financing Rate (SOFR): 0.04%, $880B
• Broad General Collateral Rate (BGCR): 0.05%, $344B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $323B
• (rate, volume levels reflect prior session)

• 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 inches up to $1,580.347B from 79 counterparties vs. $1,577.780B last Thursday. New record high of $1,758.041B posted Monday, December 20.

OUTLOOK: On Tap Tuesday: FHFA House Price Index, Richmond Fed Mfg Index

• US Data/Speaker Calendar (prior, estimate)
• Dec-28 0900 FHFA House Price Index MoM (0.9%, 0.9%)
• Dec-28 0900 S&P CoreLogic CS 20-City MoM SA (0.96%, 0.90%)
• Dec-28 1000 Richmond Fed Manufact. Index (11, 11)
• Dec-28 1130 US Tsy $34B 52W-Bill auction (912796R27)
• Dec-28 1300 US Tsy $57B 5Y note auction (91282CDQ1)