MNI ASIA OPEN: Tsy 7s10s Yld Curve Nearly Inverted

EXECUTIVE SUMMARY

• US Pres Biden Confirms Supreme Court Nomination Will Be Black Woman
• GOP Candidates Leading In Georgia Opinion Polls Ahead Of Mid-Terms

US

US: President Joe Biden has announced at a presser for Justice Stephen Breyer's resignation that his pick for the Supreme Court pick will be a black woman.

• He declined to give any more information about his pick.
• Judge Ketanji Brown Jackson and Justice Leondra Kruger are considered the frontrunners for nomination.

• GA governor polls
  • Gov. Brian Kemp (R) 48, Stacey Abrams (D) 41
  • Ex-Sen. David Perdue (R) 47, Abrams 43
• GA SEN: Herschel Walker (R) 47, Sen. Raphael Warnock (D) 44
• Trump endorsement would make you ___ to vote for candidate?: More likely 21%, Less likely 49%
• GA job approval ratings (AJC/UGA): Kemp 48 approve / 43 disapprove, Warnock 44 / 35, Sen Jon Ossoff 43 / 35, Legislature 37 / 34, Biden 34 / 62
• Most important issue: Elections/voting 24%, Economy/jobs 20, Pandemic 13, Crime/safety 10, Education 9, Health care 5, Moral issues 4
• Full tables here: https://drive.google.com/file/d/1VqkXht055CkcRL_l5...
• Georgia likely to prove a key state in the mid-terms, with the holding of Raphael Warnock (D-GA)'s seat in the Senate viewed as crucial for the Democrats in their efforts to maintain a majority.

Tsy/Eurodlr Mkt Roundup, Short End Pricing in Hawkish Fed Policy

• Lead quarterly Eurodollar futures (EDH2) remained under pressure (-0.060 at 99.475) after latest 3M LIBOR set' surged +0.02143 to 0.29900% (+0.04129/wk) highest 3M level since May 2020.
• Done and dusted: 25bp hike fully priced into Mar (some dealers starting to estimate 50bp hike in March) while Jun is more than halfway to pricing in 50bp as a result of Wed's hawkish hold from the FOMC.
• Active accts continued to add to downside/rate hike positioning: late block cross as one example: +10,000 Red Mar'23 96.75p 5.0 w/ Red Sep 96.75/97.75 put strip 50.5 cvrd. On the flipside, some significant unwinds reported even before the NY open: -60,000 short Mar 98.25 puts, 8.5-7.5.
  
• Tsy yld curves flattened (5s30s 42.78) while 7s10s see-sawed around 2.196 (-.843), little reaction to a small stop for $53B 7Y note auction (91282CDW8): 1.769% high yield vs. 1.770% WI; 2.36x bid-to-cover vs. 2.21x last month.
• Friday data focus on personal income/spending, ECI and U-Mich sentiment.
• The 2-Yr yield is up 3.4bps at 1.1842%, 5-Yr is down 2.5bps at 1.6599%, 10-Yr is down 5.4bps at 1.8101%, and 30-Yr is down 7.1bps at 2.0936%.

OVERNIGHT DATA

• US JOBLESS CLAIMS -30K TO 260K IN JAN 22 WK
  
• US PREV JOBLESS CLAIMS REVISED TO 290K IN JAN 15 WK
• US CONTINUING CLAIMS +0.051M to 1.675M IN JAN 15 WK

• US DEC DURABLE NEW ORDERS -0.9%; EX-TRANSPORTATION +0.4%
• US NOV DURABLE GDS NEW ORDERS REV TO +3.2%
• US DEC NONDEF CAP GDS ORDERS EX-AIR +0.0% V NOV +0.3%

• US Q4 GDP +6.9%

• US NAR DEC PENDING HOME SALES INDEX 117.7 V 122.3 IN NOV

• Kansas City Fed Manufacturing Index is 24 vs. 21 est.

MARKETS SNAPSHOT

Key late session market levels:

• DJIA up 26.79 points (0.08%) at 34196.86
• S&P E-Mini Future down 16.75 points (-0.39%) at 4325.25
• Nasdaq down 140.9 points (-1%) at 13402.28
• US 10-Yr yield is down 5.4 bps at 1.8101%
• US Mar 10Y are up 3.5/32 at 127-20
• EURUSD down 0.0092 (-0.82%) at 1.1148
• USDJPY up 0.64 (0.56%) at 115.28
• WTI Crude Oil (front-month) down $1.12 (-1.28%) at $86.22
• Gold is down $26.85 (-1.48%) at $1792.73

US TSY FUTURES CLOSE

• 3M10Y -5.464, 160.369 (L: 156.047 / H: 164.682)
• 2Y10Y -8.502, 62.236 (L: 60.535 / H: 68.667)
• 2Y30Y -10.14, 90.644 (L: 89.534 / H: 98.825)
• 5Y30Y -4.577, 43.235 (L: 42.452 / H: 47.843)
• Current futures levels:
• Mar 2Y down 6.375/32 at 108-9.125 (L: 108-07.625 / H: 108-11.375)
• Mar 5Y down 3.75/32 at 118-31.5 (L: 118-25.5 / H: 119-03.75)
• Mar 10Y up 5/32 at 127-21.5 (L: 127-09 / H: 127-28)
• Mar 30Y up 1-2/32 at 155-13 (L: 154-05 / H: 155-27)
• Mar Ultra 30Y up 2-15/32 at 189-06 (L: 186-21 / H: 189-25)

US TREASURY TECHNICALS: (H2)‌‌ Support Remains Exposed

• RES 4: 129-31 Low Dec 8
• RES 3: 129-16 50-day EMA
• RES 2: 129.14 High Jan 5
• RES 1: 128-19/27 20-day EMA / High Jan 13
• PRICE: 127-21 @ 16:57 GMT Jan 27
• SUP 1: 127-06+/02 Low Jan 26 / Low Jan 19 and the bear trigger
• SUP 2: 127-00+ Low Jul 31, 2019 (cont)
• SUP 3: 126-23 Low Jul 17, 2019 (cont)
• SUP 4: 126-10+ 61.8% retracement of the 2018 - 2020 bull cycle

Treasuries dipped Wednesday in response to the Fed rate decision and price remains near its recent lows. This keeps the broader downtrend intact. A bearish theme follows the recent break of support at 127-30, Jan 10 low. Furthermore, moving average studies remain in a bear mode, clearly highlighting current sentiment. 127-02, Jan 19 low, is the bear trigger for a resumption of the downtrend. Key S/T resistance is at 128-27, Jan 13 high.

US EURODOLLAR FUTURES CLOSE

• Mar 22 -0.050 at 99.485
• Jun 22 -0.085 at 99.110
• Sep 22 -0.110 at 98.810
• Dec 22 -0.115 at 98.540
• Red Pack (Mar 23-Dec 23) -0.12 to -0.05
• Green Pack (Mar 24-Dec 24) -0.025 to +0.035
• Blue Pack (Mar 25-Dec 25) +0.045 to +0.070
• Gold Pack (Mar 26-Dec 26) +0.080 to +0.10

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00071 at 0.07743% (+0.00272/wk)
• 1 Month -0.00414 to 0.10500% (-0.00271/wk)
• 3 Month +0.02143 to 0.29900% (+0.04129/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.05471 to 0.51871% (+0.07428/wk)
• 1 Year +0.11286 to 0.92157% (+0.12300/wk)

• Daily Effective Fed Funds Rate: 0.08% volume: $78B
• Daily Overnight Bank Funding Rate: 0.07% volume: $278B

• Secured Overnight Financing Rate (SOFR): 0.04%, $926B
• Broad General Collateral Rate (BGCR): 0.05%, $347B
• Tri-Party General Collateral Rate (TGCR): 0.05%, $333B
• (rate, volume levels reflect prior session)

• Tsy 22.5Y-30Y, $1.799B accepted vs. $3.874B submission
• Next scheduled purchases
• Mon 01/31 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8.425B vs. $6.325B prior
• Tue 02/01 1100-1120ET: TIPS 7.5Y-30Y, appr $1.225B vs. $0.925B prior
• Thu 02/03 1100-1120ET: Tsy 10Y-22.5Y, appr $1.625B steady
• Tue 02/08 1010-1030ET: Tsy 22.5Y-30Y, appr $1.825B steady
• Thu 02/10 1010-1030ET: Tsy 7Y-10Y, appr $3.225B vs. $2.425B prior

FED Reverse Repo Operation

NY Fed reverse repo usage recedes to $1,583.895B w/85 counterparties vs. $1,613.046B prior session -- remains well off all-time high of $1,904.582B on Friday, December 31.

PIPELINE: $4B Chile 3Pt Launched

• Date $MM Issuer (Priced *, Launch #)
• 01/27 $4B #Rep of Chile $1.5B 5Y +110, $1.5B 12Y +170, $1B 30Y +195
• 01/27 $1.85B #Proctor & Gamble (P&G) $1B 5Y +27, $850M 10Y +50
• 01/27 $1B Bausch Health 5NC2 6.25%a
• 01/27 $Benchmark Kia Corp 3Y, 5Y investor calls

EGBs-GILTS CASH CLOSE: Bear Flattening And BTPs Stand Out

European curves bear flattened Thursday in the wake of the hawkish Federal Reserve meeting after hours Wednesday, though retraced some losses over the course of the session.

• The UK short end underperformed across the core FI space. Some analysts posted more hawkish near-term BoE policy outlooks, ahead of next week's MPC.
• BTPs stood out, with spreads compressing sharply in contrast to previous sessions' widening:
• 10Y yields saw their biggest drop since Dec 17 (after hitting the highest yield since Jun 2020) as the presidential election impasse continued into Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.4bps at -0.611%, 5-Yr is up 3.4bps at -0.319%, 10-Yr is up 1.5bps at -0.059%, and 30-Yr is down 1.8bps at 0.228%.
• UK: The 2-Yr yield is up 4.5bps at 0.961%, 5-Yr is up 4.3bps at 1.065%, 10-Yr is up 3bps at 1.228%, and 30-Yr is up 1.9bps at 1.351%.
• Italian BTP spread down 5.7bps at 134.5bps / Spanish down 1.8bps at 72.8bps

FOREX: EURUSD Through Support As Greenback Surges, AUD and NZD Sink

• The dollar index surged to fresh 18-month highs as the January FOMC meeting shifted the 2022 US tightening outlook in a much more hawkish direction. The DXY was helped by EURUSD clearing significant support at 1.1185.
• By confirming the resumption of the broader downtrend that started on Jan 6, 2021 weakness has extended to within close proximity of the first support at 1.1128, a Fibonacci projection. EURUSD remains in a bear channel of which the base lies at 1.1031 today. The channel is drawn from the Jun 1 2021 high.
• With risk continuing to look shaky and equities falling significantly from their intra-day highs, Aussie and Kiwi remained under constant pressure throughout the session and are the clear G10 underperformers.
• AUDUSD (-1.22%) looks particularly susceptible to further greenback appreciation as it narrows the gap with the key support at 0.6993/91, the Dec 3 and Nov 2, 2020 lows. Moving average conditions remain in bear mode, highlighting the current sentiment.
• Elsewhere, losses against the US Dollar were broad, with JPY, GBP, CAD, CHF and CNH all under pressure. Interestingly, emerging market currency indices proved resilient, however, there may have been a disproportionate impact from a 2% recovery in the Russian Ruble with a slight easing of the high geopolitical tensions.
• The most notable data on Friday is US Core PCE Price Index, with UMich sentiment data also on the docket to round off a busy week.

Data Roundup for Friday

Date	GMT/Local	Impact	Flag	Country	Event
28/01/2022	0630/0730	**		FR	Consumer Spending
28/01/2022	0630/0730	***		FR	GDP (p)
28/01/2022	0700/0800	**		SE	Unemployment
28/01/2022	0700/0800	**		SE	Retail Sales
28/01/2022	0700/0800	***		SE	GDP
28/01/2022	0700/0800	*		NO	Norway Unemployment Rate
28/01/2022	0700/0800	**		DE	Import/Export Prices
28/01/2022	0745/0845	**		FR	PPI
28/01/2022	0800/0900	***		ES	GDP (p)
28/01/2022	0900/1000	**		IT	ISTAT Consumer Confidence
28/01/2022	0900/1000	**		IT	ISTAT Business Confidence
28/01/2022	0900/1000	***		DE	GDP (p)
28/01/2022	1000/1100	**		EU	Economic Sentiment Indicator
28/01/2022	1000/1100	*		EU	Consumer Confidence, Industrial Sentiment
28/01/2022	1000/1100	*		EU	Business Climate Indicator
28/01/2022	1330/0830	**		US	Personal Income and Consumption
28/01/2022	1330/0830	**		US	Employment Cost Index
28/01/2022	1500/1000	***		US	Final Michigan Sentiment Index
28/01/2022	1600/1100			CA	Finance Dept monthly Fiscal Monitor (expected)