MNI ASIA OPEN: Risk Appetite Wanes, No Debt Deal Yet

US TSYS: No Debt Deal Yet

Treasury futures remain weaker but off midday lows (10Y at 114-30.5 -9, yield 5.5376 +.0358), curves flatter (2s10s -2.560 at -53.833) after maintaining steeper profile in the first half.

• Weaker stocks contributing (SPX Eminis 4128.0 low) to the general risk-off tone as markets fret over debt ceiling, Jake Sherman, Punchbowl News tweeting: "Speaker McCarthy says the debt limit deal MUST include something on work requirements. He said it’s a red line for him."
• President Biden meeting with congressional leaders (McCarthy, Schumer, McConnell and Jeffries) to discus the debt limit at this moment. Biden still expected to leave for G7 summit in Japan tomorrow.
• Additional factors weighing on rates: nominal retail sales levels remain well above early 2021 levels, but that appears to be largely the effect of inflation - and April's Y/Y nominal growth was also the slowest since the contractions of 2Q 2020.
• Corporate bond issuance, rate lock sales: $31B Pfizer 8pt jumbo (helping finance $43B Seagen deal) is the fourth largest on record.
• Fed-speak all generally in-line with recent comments, latest from Atlanta's Barkin: support for holding rates but remains open to hikes if data warrants.

SHORT TERM RATES

SOFR Benchmark Settlements:

• 1M +0.00123 to 5.06765 (+.01074/wk)
• 3M +0.00825 to 5.09792 (+.03112/wk)
• 6M +0.01368 to 5.04217 (+.05670/wk)
• 12M +0.02238 to 4.70379 (+.10265/wk)

US DOLLAR LIBOR: Latest settlements:

• O/N -0.00043 to 5.06186%
• 1M +0.00358 to 5.11129%
• 3M +0.01471 to 5.34514% */**
• 6M -0.00400 to 5.37914%
• 12M -0.02529 to 5.27814%
• * Record Low 0.11413% on 9/12/21; ** New 16Y high: 5.34243% on 5/10/23

• Daily Effective Fed Funds Rate: 5.08% volume: $126B
• Daily Overnight Bank Funding Rate: 5.07% volume: $295B

• Secured Overnight Financing Rate (SOFR): 5.06%, $1.497T
• Broad General Collateral Rate (BGCR): 5.02%, $584B
• Tri-Party General Collateral Rate (TGCR): 5.02%, $576B
• (rate, volume levels reflect prior session)

FED Reverse Repo Operation

NY Fed reverse repo usage slips to $2,203.214B w/ 101 counterparties, compares to prior $2,220.927B. Compares to high usage for 2023: $2,375.171B on Friday March 31, 2023; all-time record high of $2,553.716B reached December 30, 2022.

SOFR/TREASURY OPTION SUMMARY

• SOFR Options:
  • Block, 6,000 SFRZ3 97.00/97.50 call spds 6.0 vs. 95.61/0.06%
  • Block, 5,000 SFRZ3 94.87 puts 2.5 over SFRZ3 96.00/96.50 call spds
  • +7,000 SFRZ3 96.00/97.00/98.00 call flys, 9.0 ref 95.595
  • Block, 5,000 SFRM3 95.00/95.25 call spds, 1.25 ref 94.8975
  • 3,000 SFRM3 94.56/94.68/94.81 put flys ref 94.91
  • 5,700 SFRM3 96.12 calls 1.75 ref 94.9125
  • 13,500 SFRM3 94.62/94.68/94.75/94.81 put condors ref 94.9125 to -.915
  • 4,500 SFRZ3 96.00/OQZ3 97.50 call spds, 1.0
  • Block/screen, 5,000 SFRN3 95.81/95.31/95.43/95.56 call condors, 1.5 ref 95.225
  • Block/screen, over 13,500 OQM3 96.37 puts, 12.0 vs. 96.66/0.30%
  • Block, 2,500 SFRZ3 94.81/94.93/95.06 put flys, 2.0 ref 95.70
  • 5,800 OQM3 96.37 puts ref 96.69 to -.695
• Treasury Options:
  • Block, +15,000 TYM3 113.5/114 put strip 20 vs. 114-26
  • +17,500 TYM3 114 puts, 15
  • +12,000 TYN 114/120 strangles, 46
  • Block, 10,000 TUN3 103.75 puts, 28.5 vs. 103-23/0.51%
  • 3,000 FVM3 109.75/110 put spds, 9 ref 109-26.75
  • +7,500 TYM 117 calls, 5
  • 4,500 FVN3 109.75 puts, 26.5 ref 110-24
  • 3,000 TYM3 117 calls, 8 ref 115-13.5
  • over 10,500 TYN3 118 calls, 38 ref 116-10.5 to -11
  • over 6,700 FVM3 109.75 puts, 22 ref 109-27.75
  • over 7,600 TYN3 117.5 calls, 44-45 ref 116-09

EGBs-GILTS CASH CLOSE: Bund Weakness Extends

Gilts easily outperformed Bunds Tuesday after weaker-than-expected UK labour market data spurred a reconsideration of potential BoE hikes.

• The early bullish move reversed and both German and UK yields closed at/near session highs, but implied BoE hikes (and the UK short end) didn't quite recover lost ground - terminal cumulative pricing was pared by 4bp to 41bp, with June pulling back 2bp to 19bp.
• Other than UK jobs, European data again had little impact: a weaker-than-expected German ZEW figure was worth a few ticks higher in Bunds - but 10Y German yields finished higher for the 3rd consecutive session..
• Periphery spreads were little changed. Following Monday's outperformance, GGBs underperformed - though spreads vs Bunds tightened slightly intraday after Wed's GGB auction announcement with size up to E400mln.
• Indeed supply looms large Wednesday, with France selling up to E11bln in OAT, UK GBP3.75bln of Gilt, and Germany E4bln of Bund.
• Apart from that, final Eurozone CPI and multiple ECB speakers feature.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.3bps at 2.657%, 5-Yr is up 6bps at 2.306%, 10-Yr is up 4.4bps at 2.353%, and 30-Yr is up 3.7bps at 2.55%.
• UK: The 2-Yr yield is down 1.4bps at 3.812%, 5-Yr is unchanged at 3.628%, 10-Yr is down 0.1bps at 3.816%, and 30-Yr is up 0.7bps at 4.257%.
• Italian BTP spread down 0.9bps at 186.8bps / Greek up 0.5bps at 170.9bps

EGB Options: Mostly Upside Tuesday

Tuesday's Europe rates / bond options flow included:

• DUM3 105.90 calls bought for 13.5 in 10.7k
• SFIQ3 95.25/95.45/95.55/95.75 call condor bought for 5.25 in 3K
• ERU3 96.25/96.50/96.75 call fly bought for 3.75 in 12K all day

FX: Expiries for May17 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0795-10(E751mln), $1.0825-35(E556mln), $1.0915-20(E619mln)
• USD/JPY: Y134.50($2.1bln), Y135.50($1.3bln), Y136.00-10($1.3bln), Y136.80($806mln), Y137.00($503mln)
• EUR/JPY: Y141.00(E1.0bln)
• USD/CAD: C$1.3400($1.2bln), C$1.3450($1.3bln)
• USD/CNY: Cny6.9740($595mln)

Equities Roundup: Holding Pattern Ahead Debt Limit

Stocks mixed in late trade, near the middle of a narrow session range. S&P E-Mini Future are currently down 13.5 points (-0.33%) at 4136.5; DJIA down 247.85 points (-0.74%) at 33100.77; Nasdaq up 21.5 points (0.2%) at 12386.47

• Generally speaking, markets remain in a holding pattern as they await a solution to the fast approaching debt ceiling. President Biden is currently meeting with congressional leaders (McCarthy, Schumer, McConnell and Jeffries) to discus before flying to G7 summit in Japan Wednesday.
  
• Leading laggers: Energy, Real Estate and Utilities continued to underperform while Communication Services and IT sectors held modest gains.
  
• From a technical point of view S&P E-minis remain in consolidation mode. Price is trading above the 50-day EMA, which intersects at 4109.27. An extension higher would open key resistance and the bull trigger at 4206.25, the May 1 high.
  
• A break of this level would resume the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this support would instead highlight a bearish threat.

E-MINI S&P TECHS: (M3) Watching Resistance

• RES 4: 4288.00 High Aug 19 2022
• RES 3: 4244.00 High Feb 2 and a medium-term bull trigger
• RES 2: 4223.00 High Feb 14
• RES 1: 4173.25/4206.25 High May 10 / 1
• PRICE: 4137.50 @ 1445ET May 16
• SUP 1: 4062.25 Low May 4 and key near-term support
• SUP 2: 4052.50 Low Mar 30
• SUP 3: 4022.75 50.0% retracement of the Mar 13 - May 1 bull leg
• SUP 4: 4006.00 Low Mar 29

S&P E-minis are unchanged and remain in consolidation mode. Price is trading above the 50-day EMA, which intersects at 4109.27. An extension higher would open key resistance and the bull trigger at 4206.25, the May 1 high. A break of this level would resume the bull trend that started Mar 13. Key support has been defined at 4062.25, the May 4 low. A move through this support would instead highlight a bearish threat.

COMMODITIES: Gold Through Post-Payrolls Support As USD Strength, Tsy Sell-Off Weighs

• Crude is pulling back towards the lows of the day as the market assesses global economic growth uncertainty in the US and China against near term supply disruptions from OPEC, Iraq and Canada. A steadily strengthening US dollar since US retail sales has added to the downside pressure while US SPR restocking plans from August are providing some support.
• WTI is -0.6% at $70.67 but remains comfortably above yesterday’s lows plus also support at $68.48 (May 5 low). In options space, by far the most active strikes today have been $70/bbl puts in the CLM3.
• Brent is -0.65% at $74.74, still comfortably off support at yesterday’s low of $73.49.
• Gold is -1.3% at $1990.13 with the strengthening in the USD and higher Treasury yields weighing heavily. It has pushed through support at $1999.6 (May 5 low) seen after payrolls to open $1976.3 (50-day EMA).

Wednesday Data Calendar

Date	GMT/Local	Impact	Flag	Country	Event
16/05/2023	2300/1900			US	Atlanta Fed's Raphael Bostic
16/05/2023	2300/1900			US	Chicago Fed's Austan Goolsbee
17/05/2023	2350/0850	***		JP	GDP
17/05/2023	2350/0850	***		JP	Japan GDP 1st Estimate
17/05/2023	0130/1130	***		AU	Quarterly wage price index
17/05/2023	0900/1100	***		EU	HICP (f)
17/05/2023	0900/1000	**		UK	Gilt Outright Auction Result
17/05/2023	0900/1100			EU	ECB Elderson Panels Beyond Growth Conference
17/05/2023	0930/1130			EU	ECB Panetta Presentation on Digital Euro Kangaroo Group Event
17/05/2023	0950/1050			UK	BOE Bailey Keynote Speech at British Chambers of Commerce
17/05/2023	1100/0700	**		US	MBA Weekly Applications Index
17/05/2023	1230/0830	*		CA	International Canadian Transaction in Securities
17/05/2023	1230/0830	***		US	Housing Starts
17/05/2023	1430/1030	**		US	DOE Weekly Crude Oil Stocks
17/05/2023	1515/1715			EU	ECB de Guindos Closes IESE Banking Meeting
17/05/2023	1700/1300	**		US	US Treasury Auction Result for 20 Year Bond

16/05/2023	2300/1900			US	Atlanta Fed's Raphael Bostic
16/05/2023	2300/1900			US	Chicago Fed's Austan Goolsbee
17/05/2023	2350/0850	***		JP	GDP
17/05/2023	2350/0850	***		JP	Japan GDP 1st Estimate
17/05/2023	0130/1130	***		AU	Quarterly wage price index
17/05/2023	0900/1100	***		EU	HICP (f)
17/05/2023	0900/1000	**		UK	Gilt Outright Auction Result
17/05/2023	0900/1100			EU	ECB Elderson Panels Beyond Growth Conference
17/05/2023	0930/1130			EU	ECB Panetta Presentation on Digital Euro Kangaroo Group Event
17/05/2023	0950/1050			UK	BOE Bailey Keynote Speech at British Chambers of Commerce
17/05/2023	1100/0700	**		US	MBA Weekly Applications Index
17/05/2023	1230/0830	*		CA	International Canadian Transaction in Securities
17/05/2023	1230/0830	***		US	Housing Starts
17/05/2023	1430/1030	**		US	DOE Weekly Crude Oil Stocks
17/05/2023	1515/1715			EU	ECB de Guindos Closes IESE Banking Meeting
17/05/2023	1700/1300	**		US	US Treasury Auction Result for 20 Year Bond