MNI ASIA OPEN: Tsy 2s Buoyed Ahead March CPI

EXECUTIVE SUMMARY

• MNI BRIEF: Fed's Evans Sees Neutral Rate As Soon as Year-End
• FED: Chicago Fed Pres Evans More Hawkish Than Last Week
• EVANS SAYS 50 BPS HIKE IN MAY IS `WORTHY OF CONSIDERATION', Bbg
• MNI BRIEF: US Near-Term Price Expectations Hit Record - NY Fed
• US: MNI CPI Preview: Core Services Eyed As Energy Rips

Tsy 2s/10s Yield Curve Rebound

US

FED: Evans More Hawkish Than Last Week
A 2023 voter, Chicago Fed's Evans appears more hawkish than when he spoke last week.

• On the path, he had noted last week that he would want to get towards neutral by end-22 or early-23. His estimate of the neutral rate at 2.25-2.5% is unchanged, just the potential speed in which to get there.
  
• He had been a dot voting for 7 hikes in 2022 at the March FOMC (i.e. 1.75-2% for end-2022).
  
• FOMC-dated Fed Funds futures currently sit at 47bps for May 4, 94bps for Jun 15 and 220bps to year-end.

FED: Chicago Federal Reserve President Charles Evans said the central bank could tighten to a neutral interest rate between the end of this year and March of next year to help bring inflation down.

• "Maybe you want to front load a little bit more, end of the year makes sense, that would be nine increases as I understand it," he said on a media call Monday. While inflation may remain high this year and next, it's not a permanent trend like the experience in the 1970s, he said.

US TSYS: 30YY Tops 2.8352%

Tsy futures trade broadly weaker for the most part after Monday's close, curves bear steepening with 2s trading higher.

• Note, 2s10s currently +9.793 at 27.614 compares to inverted low of -9.561 a week ago Sunday as recession calls from dealers peaked. Trepidation over Tuesday's CPI data for March may be spurring some short end buying and rebound in curves off deeper inversion (recession flag).
• Re: chances of a recession in the U.S., GS strategists "found, when combining different segments of the yield curve a low probability of recession in the next 12 months is priced, but a 38% probability in 24 months".
• Highlight Block/cross: Massive 2Y vs. 5Y and 30Y ultra-bond steepener package at 1119:55ET
  • +49,000 TUM2 105-19.25, buy through 105-18.38 post-time offer, $2M DV01
  • -11,167 FVM2 113-01.75, sell-through 113-03.5 post-time bid, $540k DV01
  • -3,006 WNM2 165-00, sell-through 165-09 post-time bid, 910k DV01
• Meanwhile, Treasury futures still held weaker/near lows after $46B 3Y note auction (91282CEH0) trades through: 2.738% high yield vs. 2.740% WI; 2.48x bid-to-cover vs. 2.39x last month.
• Speaking of supply, FI markets also weighed down by rate lock hedging vs. Amazon 7pt debt issuance spanning 2Y -40Y.

OVERNIGHT DATA

US: U.S. households' expectations for the near-term future path of inflation surged to record levels in March to 6.6% from 6.0% in February, while home price growth expectations also ticked up but expectations about future credit availability deteriorated, according to a New York Fed survey published Monday.

• Three years from now, survey respondents see inflation hitting 3.7%, from the prior month's 3.8% reading, the Fed bank said. The March reading remains under the October 2021 peak of 4.2%.

MARKETS SNAPSHOT

Key late session market levels

• DJIA down 289.42 points (-0.83%) at 34434.64
• S&P E-Mini Future down 58.75 points (-1.31%) at 4424.75
• Nasdaq down 232.9 points (-1.7%) at 13478.9
• US 10-Yr yield is up 8.6 bps at 2.7858%
• US Jun 10Y are down 13.5/32 at 119-22.5
• EURUSD up 0.001 (0.09%) at 1.0887
• USDJPY up 1.11 (0.89%) at 125.45
• WTI Crude Oil (front-month) down $3.91 (-3.98%) at $94.27
• Gold is up $3.09 (0.16%) at $1950.66

US TSY FUTURES CLOSE

• 3M10Y +6.294, 206.472 (L: 199.729 / H: 207.147)
• 2Y10Y +10.395, 28.216 (L: 16.417 / H: 29.242)
• 2Y30Y +12.932, 32.57 (L: 16.639 / H: 33.455)
• 5Y30Y +7.693, 3.787 (L: -7.293 / H: 4.142)
• Current futures levels:
• Jun 2Y up 1.875/32 at 105-18.5 (L: 105-12 / H: 105-19.625)
• Jun 5Y down 3.25/32 at 113-3.25 (L: 112-26.25 / H: 113-05.25)
• Jun 10Y down 13.5/32 at 119-22.5 (L: 119-17 / H: 120-03)
• Jun 30Y down 1-07/32 at 141-30 (L: 141-27 / H: 143-08)
• Jun Ultra 30Y down 2-15/32 at 164-17 (L: 164-12 / H: 167-21)

‌‌‌‌US 10Y FUTURES TECH:‌‌ (M2)‌‌ Southbound

• RES 4: 124–21+ 50-day EMA
• RES 3: 124-18 High Mar 21
• RES 2: 123-04 High Mar 31 and a key resistance
• RES 1: 121-06+/22-19 High Apr 7 / 20-day EMA
• PRICE: 119-23+ @ 11:09 BST Apr 11
• SUP 1: 119-17 Intraday low
• SUP 2: 119-04+ Low Dec 3 2018 (cont)
• SUP 3: 118-02+ 0.618 proj of the Mar 7 - 28 - 31 price swing
• SUP 4: 117-22+ Low Nov 8 2018 (cont)

Treasuries have started the week on a softer note, trading to a fresh cycle low of 119-17. The break lower confirms a resumption of the primary downtrend and maintains the bearish price sequence of lower lows and lower highs. Moving average studies are also pointing south and scope is seen for a move towards 119-04+ next, the Dec 3 2018 low (cont). Key short-term trend resistance has been defined at 123-04, the Mar 31 high.

US EURODOLLAR FUTURES CLOSE

• Jun 22 steady at 98.330
• Sep 22 -0.010 at 97.630
• Dec 22 -0.005 at 97.090
• Mar 23 +0.010 at 96.775
• Red Pack (Jun 23-Mar 24) +0.020 to +0.055
• Green Pack (Jun 24-Mar 25) -0.05 to steady
• Blue Pack (Jun 25-Mar 26) -0.105 to -0.06
• Gold Pack (Jun 26-Mar 27) -0.13 to -0.115

SHORT TERM RATES

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00171 at 0.32586% (+0.00028 total last wk)
• 1 Month +0.01057 to 0.52457% (+0.07643 total last wk)
• 3 Month +0.01072 to 1.02143% (+0.04871 total last wk) ** Record Low 0.11413% on 9/12/21
• 6 Month +0.01300 to 1.55343% (+0.05129 total last wk)
• 1 Year +0.00886 to 2.28043% (+0.10000 total last wk)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 0.33% volume: $77B
• Daily Overnight Bank Funding Rate: 0.32% volume: $258B

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 0.30%, $905B
• Broad General Collateral Rate (BGCR): 0.30%, $337B
• Tri-Party General Collateral Rate (TGCR): 0.30%, $328B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage inches higher: 1,758.958B w/ 85 counterparties from prior session 1,750.498B. Compares to all-time high of $1,904.582B on Friday, December 31.

PIPELINE: $12.75B Amazon 7Pt Jumbo Launched

• Date $MM Issuer (Priced *, Launch #)
• 04/11 $12.75B #Amazon 7pt: $1.5B 2Y +22, $1.5B 3Y +32, $2B 5Y +55, $1.5B 7Y +65, $2.5B 10Y +85, $2.5B 30Y +115, $1.25B 40Y +130
• 04/11 $3B #South Africa $1.4B 10Y 5.875%, $1.6B 30Y 7.30%
• 04/11 $2B #TD Bank 5Y SOFR+70
• 04/11 $1.1B #OMERS Fnc Trust $600M 10Y +75, $500M 30Y +125
• 04/11 $Benchmark MUFG 4NC3 +112.5, 6NC5 +130, 11NC10 +155
• 04/11 $Benchmark Bayport 5Y +195a, 10Y +235a
• 04/11 $Benchmark IDB 3Y investor calls
• 04/11 $Benchmark John Deere Capital investor calls

EGBs-GILTS CASH CLOSE: OAT Spreads Tighten After Macron Win

Bunds modestly underperformed Gilts Monday, with both underperforming US Treasuries following Sunday's better-than-expected result for France Pres Macron in the 1st round of presidential elections.

• With Macron a firmer favourite to win re-election, 10Y OAT spreads tightened ~4bp (as did BTPs).
• As the France election safe haven bid evaporated (and exacerbated by US curve steepening), 10Y yields hit new multi-year highs: UK since Jan 2016, Germany since Sept 2015.
• Attention turns to Tuesday's US CPI report and Thursday's ECB meeting.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 8.4bps at 0.134%, 5-Yr is up 9.8bps at 0.626%, 10-Yr is up 10.9bps at 0.816%, and 30-Yr is up 11.9bps at 0.928%.
• UK: The 2-Yr yield is up 8bps at 1.56%, 5-Yr is up 8.4bps at 1.614%, 10-Yr is up 9.8bps at 1.848%, and 30-Yr is up 8.6bps at 1.985%.
• Italian BTP spread down 3.9bps at 165.1bps / Spanish down 5.9bps at 93.7bps

FOREX: CHFJPY Rises 1.25%, Breaches Mid 2015 Highs

• USDJPY in particular has started the week on a firmer note and has breached key near term resistance 125.09, the Mar 28 high. The break higher confirms the end of the recent corrective cycle and more importantly, confirms a resumption of the primary uptrend.
• Price extended to highs of 125.77, narrowing the gap with 125.86, the Jun 5 2015 high and a major resistance. Above here price may initially target 126.26 -- 3.382 proj of the Dec 3 ‘21 - Jan 4 -24 price swing.
• Slightly mixed performance for the greenback on Monday with obvious gains against the yen offset by losses against the CHF and the Euro. The USD index resides in positive territory however and is hovering close to recent cycle highs and the best levels since May 2020 around the 100 mark. Latest commentary from the Fed’s Evans suggests the US dollar reflects Fed policy pivot toward neutral.
• Weakness in Equities weighed on the likes of AUD, NZD and CAD, all falling between 0.2-0.45%.
• Notable Strength in the Swiss Franc throughout Monday’s US session with EURCHF retreating from 1.0206 morning highs and grinding consistently lower to print a fresh month low below 1.0130.
• EURCHF tested minor Fibonacci support at 1.0124, with more notable support residing at 0.9972, the March lows.
• CHF strength comes amid equity weakness and in stark contrast to the resumption of JPY weakness. Exacerbating this divergence was the CHF/JPY cross rising above the mid 2015 highs around 134.50, currently up 1.25%. The next most notable level for the pair is up around 139 which represents the SNB peg removal highs.
• Focus for tomorrow will be US CPI where the consensus has the headline print surging +1.2% M/M in Feb on sharp rises in energy (~12% M/M) and less so food (1% M/M). That would see year-on-year inflation rise further from 7.9% to 8.4%. UK unemployment as well as German ZEW sentiment data are notable releases during early European trade.

Tuesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
12/04/2022	2301/0001	*		UK	BRC-KPMG Shop Sales Monitor
12/04/2022	0600/0700	***		UK	Labour Market Survey
12/04/2022	0600/0800	***		DE	HICP (f)
12/04/2022	0645/0845	*		FR	Foreign Trade
12/04/2022	0645/0845	*		FR	Current Account
12/04/2022	0900/1100	***		DE	ZEW Current Conditions Index
12/04/2022	0900/1100	***		DE	ZEW Current Expectations Index
12/04/2022	1000/0600	**		US	NFIB Small Business Optimism Index
12/04/2022	1230/0830	***		US	CPI
12/04/2022	1255/0855	**		US	Redbook Retail Sales Index
12/04/2022	1400/1000	**		US	IBD/TIPP Optimism Index
12/04/2022	1610/1210			US	Fed Governor Lael Brainard
12/04/2022	1700/1300	**		US	US Note 10 Year Treasury Auction Result
12/04/2022	1700/1300			US	Philadelphia Fed's Patrick Harker
12/04/2022	1800/1400	**		US	Treasury Budget
12/04/2022	2245/1845			US	Richmond Fed's Tom Barkin