MNI ASIA OPEN: Waiting For Fri's March Jobs Data

EXECUTIVE SUMMARY

• MNI INTERVIEW: KC Fed Index Implies Jobless Rate Nearing 3%
• MNI FED: Richmond Fed Barkin Still Open To Hiking 50bps In May If Needed
• MNI FED: KC Fed's George Prefers Steady Hikes, Faster Runoff
• MNI BRIEF: St Louis Fed Model Signals 300k Gain For March Jobs
• MNI: US Imposes New Sanctions On Iran

US

FED: Kansas City Federal Reserve President Esther George said Wednesday it is clear that removing accommodation is required and laid out a more cautions stance on raising the federal funds rate, paired with a desire to roll assets off of the central bank's balance sheet faster.

• "Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate," she said, characterizing recent inflation as a result of supply constraints in the face of strong demand. For more see MNI Policy main wire at 1300ET.

FED: Adjusting the unemployment rate to incorporate information from the Kansas City Federal Reserve's Labor Market Conditions Indicators measure suggests the labor market is tighter than the unemployment rate alone implies and is consistent with a 3.1% unemployment rate, KC Fed senior economist Andrew Glover told MNI.

• The LMCI-implied unemployment rate is below the Bureau of Labor Statistics' official 3.8% rate and "certainly could" go under 3%, said Glover about updated analysis for February data, adding that it is likely to continue to fall reflecting that activity has increased. "The LMCI essentially says labor markets are stronger than the unemployment rate alone would tell you." For more see MNI Policy main wire at 1155ET.

• Headlines from Barkin (2024 voter) so far largely repeating comments from Mar 18 when he said the Fed could do 50bp hikes as it has in the past, if we start to believe that is necessary to prevent inflation expectations from unanchoring.
  
  • FED'S BARKIN SAYS OPEN TO HIKING BY 50 BPS IN MAY IF NEEDED - bbg
  • BARKIN: UKRAINE WAR IMPACTING INFLATION, DEMAND NOT HURT SO FAR - bbg
  • BARKIN: STILL SEE A LOT OF EXCESS DEMAND FOR LABOR - bbg
• At the time of speaking, Fed Funds futures price a 43bp hike for the May meeting and 85.5bps for June, the latter implying a 61% chance of 100bp of hikes over the two meetings.

US TSYS: Waiting For Fri's March Jobs Data

• Aside from mixed geopol headlines re: Russia/Ukraine, KC Fed George generated some interest after midday after mentioning "FED BALANCE SHEET SIZE NEEDS TO DECLINE SIGNIFICANTLY ... while "ROLLING OFF FED ASSET HOLDINGS COULD HELP STEEPEN CURVE" Bbg.
• George said it's clear that removing accommodation is required and laid out a more cautions stance on raising the federal funds rate, paired with a desire to roll assets off of the central bank's balance sheet faster.
• "Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate," she said, characterizing recent inflation as a result of supply constraints in the face of strong demand.
• Little/no react to March ADP +455 vs. +450 est, +6.9%. Thursday data focus on weekly claims (+196k est), Personal income/spending at 0830ET; Chicago PMI (57.0 vs. 56.3 prior) at 0945ET.
• The 2-Yr yield is down 4.4bps at 2.3204%, 5-Yr is down 5.8bps at 2.4399%, 10-Yr is down 4.6bps at 2.3488%, and 30-Yr is down 2.8bps at 2.4735%.

OVERNIGHT DATA

• ADP RESEARCH INSTITUTE SAYS U.S. ADDED 455,000 JOBS IN MARCH

• US Q4 GDP +6.9%

• 4Q Final PCE Price Index +6.4% Vs Prelim +6.3%
• 4Q Final Core PCE Price Index +5.0% Vs Prelim +5.0%

MARKETS SNAPSHOT

Key late session market levels:

• DJIA down 181.9 points (-0.52%) at 35114.25
• S&P E-Mini Future down 41.75 points (-0.9%) at 4583.75
• Nasdaq down 196.3 points (-1.3%) at 14423.52
• US 10-Yr yield is down 4.4 bps at 2.3506%
• US Jun 10Y are up 11.5/32 at 122-22
• EURUSD up 0.0073 (0.66%) at 1.1159
• USDJPY down 1.03 (-0.84%) at 121.85
• WTI Crude Oil (front-month) up $3.24 (3.11%) at $107.47
• Gold is up $13.85 (0.72%) at $1933.29

US TSY FUTURES CLOSE

• 3M10Y -1.253, 180.561 (L: 176.112 / H: 186.516)
• 2Y10Y +0.475, 2.842 (L: 1.089 / H: 8.46)
• 2Y30Y +2.268, 15.319 (L: 12.522 / H: 20.812)
• 5Y30Y +3.245, 3.197 (L: 0.007 / H: 5.122)
• Current futures levels:
• Jun 2Y up 2/32 at 105-28.625 (L: 105-24.5 / H: 105-30)
• Jun 5Y up 6.5/32 at 114-18.75 (L: 114-06.25 / H: 114-21.5)
• Jun 10Y up 12/32 at 122-22.5 (L: 122-00.5 / H: 122-26.5)
• Jun 30Y up 19/32 at 149-17 (L: 148-06 / H: 150-01)
• Jun Ultra 30Y up 1-11/32 at 176-8 (L: 174-03 / H: 177-02)

‌‌US 10Y FUTURES TECH: (M2)‌‌ Resistance Remains Intact

• RES 4: 126-04 High Mar 14RES 3: 124-06+ 20-day EMA
• RES 2: 123-25+ Low Mar 16 and a recent breakout level
• RES 1: 122-26+/123-12 Intraday high / Mar 23
• PRICE: 122-0+ @ 11:08 GMT Mar 30
• SUP 1: 120-30+ Low Mar 28 and the bear trigger
• SUP 2: 120.28 Low Dec 26 2018 (cont)
• SUP 3: 120-04+ Low Dec 12/13 2018 (cont)
• SUP 4: 120.00 Low Dec 6 2018 (cont) and psychological support

The trend direction in Treasuries is bearish and short-term gains are considered corrective. A bearish price sequence of lower lows and lower highs continues to dominate and moving average conditions are in a bear mode. The recent break lower signals scope for weakness towards 120-28 next ahead of the psychological 120-00 handle. Resistance is seen at 123-12, the Mar 23 high.

US EURODOLLAR FUTURES CLOSE

• Jun 22 +0.050 at 98.465
• Sep 22 +0.050 at 97.795
• Dec 22 +0.040 at 97.315
• Mar 23 +0.035 at 97.005
• Red Pack (Jun 23-Mar 24) +0.040 to +0.055
• Green Pack (Jun 24-Mar 25) +0.035 to +0.045
• Blue Pack (Jun 25-Mar 26) +0.055 to +0.085
• Gold Pack (Jun 26-Mar 27) +0.080 to +0.085

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N +0.00057 at 0.32814% (+0.00157/wk)
• 1 Month -0.00229 to 0.45514% (+0.01000/wk)
• 3 Month -0.03914 to 0.96686% (-0.01600/wk) ** Record Low 0.11413% on 9/12/21
• 6 Month -0.02771 to 1.47200% (+0.02086/wk)
• 1 Year -0.07714 to 2.12586% (+0.03715/wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.33% volume: $83B
• Daily Overnight Bank Funding Rate: 0.32% volume: $255B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.28%, $874B
• Broad General Collateral Rate (BGCR): 0.30%, $332B
• Tri-Party General Collateral Rate (TGCR): 0.30%, $320B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage climbs to $1,785.939B w/ 86 counterparties vs. prior session's $1,718.870B. Compares to Wed, March 23 year-to-date high of $1,803.186B and all-time high of $1,904.582B on Friday, December 31.

PIPELINE: $2.25B Rabobank Launched, Drops SOFR Leg

• Date $MM Issuer (Priced *, Launch #)
• 03/30 $4B #CIBC $1.35B 3Y +85, $650M 3Y SOFR+94, $1B 5Y +105, $1B 10Y +130
• 03/30 $3B #Workday $1B 5Y +107, $750M 7K +127, $1.25B 10Y +147
• 03/30 $2.25B #Rabobank $1.25B 6NC5 +122, $1B 11NC10 +142
• 03/30 $1.25B #National Bank of Canada 5Y +65
• 03/30 $1.25B *ADB 5Y SOFR+28
• 03/30 $600M *DT Midstream 10Y +195

EGBs-GILTS CASH CLOSE: Negative Yields Disappearing

German FI underperformed UK counterparts Wednesday with sharp bear flattening in the curve as ECB rate hike expectations edged higher.

• Higher-than-expected Spanish and German inflation data spurred a sell-off at the short end, more than offsetting weak economic sentiment data.
• As end-2022 ECB rate expectations rose into positive territory for the first time, likewise Schatz yields closed above 0% for the first time since 2014.
• Greece outperformed, with 10Y GGB spreads narrowing 10bp.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.5bps at 0.002%, 5-Yr is up 5.2bps at 0.484%, 10-Yr is up 1.3bps at 0.646%, and 30-Yr is up 0.7bps at 0.732%.
• UK: The 2-Yr yield is up 2.7bps at 1.382%, 5-Yr is up 2.6bps at 1.443%, 10-Yr is up 2.4bps at 1.666%, and 30-Yr is up 2.4bps at 1.813%.
• Italian BTP spread unchanged at 148.2bps / Greek down 10.3bps at 212.6bps

FOREX: Greenback Declines For Second Day, DXY Lowest Print Since March 3

• The dollar index retreated for a second consecutive session and briefly hit a near four-week low as the greenback unwinds a good portion of the March gains for the index.
• USD losses were broad based with the Japanese Yen and the Swiss France the main beneficiaries.
• The JPY has risen 0.82%, extending the bounce off the multi-year cycle lows printed earlier in the week. This places USD/JPY back below the Y122.00 handle approaching the APAC crossover. The move is considered corrective and is beginning to allow a recent extreme overbought condition to unwind. Any extension lower would open 120.95, the Mar 24 low ahead of the 120.00 handle.
• In similar vein, the Euro continued to grind higher amid the dollar weakness and in the process breached the key near-term resistance of 1.1137, Mar 17 high. A break of this hurdle eases recent bearish threats and instead highlights a developing bullish theme. Note too that the 50-day EMA intersects at 1.1150, an equally important resistance. A breach of this zone opens 1.1232 as a target.
• A slightly more muted session for equities/oil prices leaves the likes of AUD and CAD hovering around unchanged for Wednesday and underperforming their G10 counterparts.
• Chinese PMI’s on the data docket overnight before a flurry of minor European data points including German/Eurozone unemployment.
• US Core PCE Price Index headlines the US schedule as well as Canadian GDP for January being released. Later on Thursday, we will publish the MNI Chicago Business Barometer.

Thursday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
31/03/2022	2350/0850	**		JP	Industrial production
31/03/2022	0030/1130	*		AU	Building Approvals
31/03/2022	0030/1130	**		AU	Lending Finance Details
31/03/2022	0600/0700	***		UK	GDP Second Estimate
31/03/2022	0600/0700	*		UK	Quarterly current account balance
31/03/2022	0630/0730			UK	DMO Gilt Operations Calendar April-June
31/03/2022	0630/0830	**		CH	retail sales
31/03/2022	0645/0845	**		FR	Consumer Spending
31/03/2022	0645/0845	**		FR	PPI
31/03/2022	0645/0845	***		FR	HICP (p)
31/03/2022	0755/0955	**		DE	unemployment
31/03/2022	0800/1000			EU	ECB Lane Lecture at Paris School of Economics
31/03/2022	0900/1100	**		EU	unemployment
31/03/2022	0900/1100	***		IT	HICP (p)
31/03/2022	1000/1200			EU	ECB de Guindos at Discussion at University of Amsterdam
31/03/2022	1230/0830	**		US	Jobless Claims
31/03/2022	1230/0830	**		US	Personal Income and Consumption
31/03/2022	1230/0830	**		US	WASDE Weekly Import/Export
31/03/2022	1230/0830	***		CA	Gross Domestic Product by Industry
31/03/2022	1300/0900			US	New York Fed's John Williams
31/03/2022	1345/0945	**		US	MNI Chicago PMI
31/03/2022	1430/1030	**		US	Natural Gas Stocks
31/03/2022	1530/1130	**		US	NY Fed Weekly Economic Index
31/03/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
31/03/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
31/03/2022	1600/1200	**		US	USDA GrainStock - NASS
31/03/2022	1600/1200	***		US	USDA PROSPECTIVE PLANTINGS - NASS
01/04/2022	2200/0900	**		AU	IHS Markit Manufacturing PMI (f)