MNI ASIA OPEN: Tsys Recover Slightly, Fed in Blackout

US

US FED (MNI): 'Last Mile' Could Still Be The Hardest - BIS' Carstens

• Bank for International Settlements General Manager Agustin Carstens on Monday said recent central banks' "success we have had so far must not breed complacency," even as most major institutions have signaled policy rates have likely peaked.
• "The job is not complete yet, and considerable risks remain," he said in prepared remarks, noting the end of exceptional tightening is in sight. "Policymakers must heed the signposts and remain steadfast in their commitment to completing the disinflation journey while reinvigorating efforts to ensure sustainable fiscal paths and lift productivity growth."

NEWS

US (MNI): Trump Could Play Spoiler In US-Mexico Border Deal
Senate negotiators are cautiously optimistic that they can release a final text of their US-Mexico border deal this week. There is also caveated optimism that the deal can unlock a vote on President Biden’s USD$106 billion supplemental funding request.

INTERVIEW (MNI): BOE Forward Guidance Key Tool However It is Called
Forward guidance is a powerful tool for central banks however they like to define it, a U.S. academic whose methodology has been adopted by the Bank of England told MNI. BOE research drawing on Eric Swanson’s methods has highlighted the significance of forward-looking language in monetary policy statements, and is likely to reinforce caution at the Bank over any change to language in its current statement referencing the possibility of further interest rate hikes.

BOC WATCH (MNI): Macklem Core Focus To Clash With Rate Cut Hopes
BOC Governor Tiff Macklem is likely Wednesday to stick with his view that core inflation remains too hot to justify interest rate cuts as the central bank is set to hold borrowing costs at their highest level since 2001.

BoC Preview, Jan'24 (MNI): Expecting Too Soon For Cuts Reiteration
The BoC is unanimously expected to hold its policy rate at 5% with greater focus on the statement’s tone and macro forecasts before Macklem’s press conference. One important area will be to what extent the BoC sees the recent resurgence in its preferred core inflation metrics as “bumps along the way” in a path back towards the 2% inflation target.

ECB WATCH (MNI): ECB To Hold With Cuts Seen By Mid-Year
The European Central Bank is expected to hold key interest rates at 4.00% this Thursday, amid signs that an early consensus is forming for a first cut of the cycle in June. While the Governing Council is likely to resist attempts by some members to discuss the timing of cuts this week, the topic is no longer taboo.

UK (MNI): PM Confirms Chancellor To Remain In Place As Tax Cut Expectations Rise
Prime Minister Rishi Sunak has confirmed that Chancellor of the Exchequer Jeremy Hunt will still be in office at the time of the next general election amid increasing speculation that the gov't could announce sizeable personal tax cuts in the 6 March budget statement.

SECURITY (MNI): Biden And Sunak Discuss "Continued Multilateral" Approach In Red Sea
White House National Security Council Spokesperson John Kirby has told reporters that President Biden and UK Prime Minister Rishi Sunak have just completed a call to discuss the need for, "a continued, international, multilateral approach to disrupting and degrading Houthi capabilities," in the Red Sea.

NATO (MNI): Turkey Parl't Set To Vote On Sweden Accession Bid This Week-Wires
Wires reporting that the Turkish Grand National Assembly (GNA) is set to vote this week on the ratification of Sweden's bid to join NATO.

US Tsys Recover Some Ground With the Fed in Blackout

• Markets started the new week with a risk-on tone with S&P eminis making new contract highs (ESH4 4898.25), while FI markets recovered some ground lost to last week's pushback from the Fed regarding projected rate cut pricing through mid-2024.
• Fed entered blackout regarding monetary policy late Friday (through February 1, day after the first policy annc for 2024). The Bank of Japan kicks off the latest central Bank policy annc cycle sometime after 2130ET tonight, BoJ Ueda presser follows appr 4 hours later.
• Moderate volumes, TYH4 over 1.1M as the contract see-sawed in the upper half of the session range, trading 111-13.5 (+9.5) after the bell -- well inside technicals: with resistance at 111-26/112-26+ (20-day EMA / High Jan 12) vs. support at 110-26 (Low Jan 19).
• Lone data point on the day: Conference Board leading economic index fell by less than expected in December, down -0.1% M/M (cons -0.3) after -0.5%. It marks the first beat since the August report and is only the third beat for the past year, whilst it’s also the smallest decline since a flat print in Mar 2022.
• Tuesday focus: Regional Fed Mfg Data, and Tsy 2Y Note Sale. The main focus, however, is on estimate of Q4 GDP released Thursday, followed by consumer spending and PCE deflators on Friday.

OVERNIGHT DATA

US DATA: The Conference Board leading economic index fell by less than expected in December, down -0.1% M/M (cons -0.3) after -0.5%.

• It marks the first beat since the August report and is only the third beat for the past year, whilst it’s also the smallest decline since a flat print in Mar 2022.
• From the press release: “Despite the overall decline, six out of ten leading indicators made positive contributions to the LEI in December. Nonetheless, these improvements were more than offset by weak conditions in manufacturing, the high interest-rate environment, and low consumer confidence.”
• “As the magnitude of monthly declines has lessened, the LEI’s six-month and twelve-month growth rates have turned upward but remain negative, continuing to signal the risk of recession ahead.”
• “Overall, we expect GDP growth to turn negative in Q2 and Q3 of 2024 but begin to recover late in the year.”

MARKETS SNAPSHOT

• Key market levels of markets in late NY trade:
• DJIA up 133.04 points (0.35%) at 37997.22
• S&P E-Mini Future up 14.5 points (0.3%) at 4884.5
• Nasdaq up 59.2 points (0.4%) at 15370.29
• US 10-Yr yield is down 2.3 bps at 4.0995%
• US Mar 10-Yr futures are up 10/32 at 111-14
• EURUSD down 0.0015 (-0.14%) at 1.0883
• USDJPY down 0.02 (-0.01%) at 148.1
• WTI Crude Oil (front-month) up $1.78 (2.42%) at $75.19
• Gold is down $9.6 (-0.47%) at $2019.90
• European bourses closing levels:
• EuroStoxx 50 up 31.49 points (0.71%) at 4480.32
• FTSE 100 up 25.78 points (0.35%) at 7487.71
• German DAX up 128.23 points (0.77%) at 16683.36
• French CAC 40 up 41.61 points (0.56%) at 7413.25

US TREASURY FUTURES CLOSE

• 3M10Y -2.75, -127.713 (L: -130.649 / H: -125.113)
• 2Y10Y -2.322, -28.943 (L: -30.303 / H: -26.725)
• 2Y30Y -1.086, -7.116 (L: -9.48 / H: -5.352)
• 5Y30Y +1.575, 29.178 (L: 26.247 / H: 30.34)
• Current futures levels:
• Mar 2-Yr futures up 1.125/32 at 102-19.5 (L: 102-17.625 / H: 102-20.75)
• Mar 5-Yr futures up 5.5/32 at 107-27.25 (L: 107-21.5 / H: 107-30.5)
• Mar 10-Yr futures up 10/32 at 111-14 (L: 111-04.5 / H: 111-19.5)
• Mar 30-Yr futures up 21/32 at 120-21 (L: 120-04 / H: 121-05)
• Mar Ultra futures up 23/32 at 126-24 (L: 126-07 / H: 127-14)

US 10Y FUTURE TECHS: (H4) Bear Threat Remains Present

• RES 4: 114-06+ 2.00 proj of the Oct 19 - Nov 3 - Nov 13 price swing
• RES 3: 114-00 Round number resistance
• RES 2: 113-12 High Dec 27 and the bull trigger
• RES 1: 111-26/112-26+ 20-day EMA / High Jan 12
• PRICE: 111-15 @ 16:34 GMT Jan 22
• SUP 1: 110-26 Low Jan 19
• SUP 2: 110-16 Low Dec 13
• SUP 3: 109-31+ Low Dec 11 and a key short-term support
• SUP 4: 109-17 50.0% of the Oct 19 - Dec 27 bull phase

Treasuries traded lower last week, to a weekly low of 110-26 on Friday. Price has pierced the 50-day EMA, at 111-03 and support at 111-06+, the Jan 5 low. A clear break of both levels would undermine the recent bullish theme and signal scope for a deeper pullback, opening 110-16, the Dec 13 low. Initial firm resistance has been defined at 112-26+, the Jan 12 high. Clearance of this level would be a bullish development.

SOFR FUTURES CLOSE

• Mar 24 -0.010 at 94.850
• Jun 24 -0.005 at 95.265
• Sep 24 +0.010 at 95.680
• Dec 24 +0.020 at 96.040
• Red Pack (Mar 25-Dec 25) +0.030 to +0.050
• Green Pack (Mar 26-Dec 26) +0.055 to +0.060
• Blue Pack (Mar 27-Dec 27) +0.060 to +0.060
• Gold Pack (Mar 28-Dec 28) +0.055 to +0.060

FIXES AND PRIOR SESSION REFERENCE RATES

SOFR Benchmark Settlements:

• 1M -0.00091 to 5.33503 (-0.00204 total last wk)
• 3M +0.00278 to 5.31858 (-0.00073 total last wk)
• 6M +0.01769 to 5.17702 (+0.00586 total last wk)
• 12M +0.03874 to 4.83723 (+0.00871 total last wk)

• Secured Overnight Financing Rate (SOFR): 5.31% (+0.00), volume: $1.688T
• Broad General Collateral Rate (BGCR): 5.30% (+0.00), volume: $674B
• Tri-Party General Collateral Rate (TGCR): 5.30% (+0.00), volume: $665B
• (rate, volume levels reflect prior session)

• Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $94B
• Daily Overnight Bank Funding Rate: 5.31% (+0.00), volume: $269B

FED Reverse Repo Operation

• RRP usage climbs to $647.103B vs. $625.182B last Friday. Compares to $583.103B on Tuesday, January 16 - the lowest level since mid-June 2021.
• Meanwhile, the number of counterparties inches up to 84 from 79 on Friday (65 Tuesday last Tuesday, the lowest since July 7, 2021)

PIPELINE: $5B Saudi Wealth Fund PIF on Tap, $4.5B Brazil Launched

Saudi Wealth fund, Public Investment Fund or PIF, to launch $5B over 3 tranches today (order bokk was well over $20B by midmorning). Still waiting for NY Life and to launch.

• Date $MM Issuer (Priced *, Launch #)
• 1/22 $5B PIF $1.75B 5Y +115, $1.75B 10Y +145, $1.5B 30Y +205
• 1/22 $4.5B #Brazil $2.25B +10H +6.35%, $2.25B +30Y +7.15%
• 1/22 $3.5B #Truist Financial $1.5B 6NC5 +142, $2B 11NC10 +162
• 1/22 $1B *Fifth Third 8NC7 +155
• 1/22 $1B #CCDJ 5Y +125
• 1/22 $650M #Private Export $350M -5Y +27, $300M 10Y +52
• 1/22 $600M *MidAmerican Energy 31Y +98
• 1/22 $Benchmark New York Life 5Y +72

FOREX Broader Themes Intact as Markets Pre-Position for BoJ Decision

• Commodity-tied currencies and namely the CAD and AUD underperformed modestly on Monday, but broader trends and themes were unchanged given the proximity to the BoJ and ECB rate decisions as well as the FOMC entering their pre-decision media blackout period.
• The Bank of Japan rate decision due Tuesday takes focus going forward. While consensus looks for no change in policy, any guidance or suggestion toward potential tightening in April will be carefully watched by markets. JPY vols suitably bid ahead of the decision, with overnight implied marked higher to 17 points, implying a ~105 pip swing - around double the swing implied average background vol this year.
• GBP/USD traded generally well, despite a lack of domestic newsflow. The pair extends the winning streak to four consecutive sessions of higher lows to keep the 50-dma trending higher, and acting as intraday support at 1.2646. Pre-BoE comms and the prelim January PMI data could be key for any test of these levels, particularly any standout trends for services inflation, after the ONS Y/Y services CPI topped forecast by 0.3ppts.
• Particular pessimism on wages or the impact of recent earthquakes could prove JPY negative, and 148.80 will be eyed as the initial upside level - comfortably captured by the options-implied swing in spot.
• Elsewhere, focus for the Tuesday session shifts to UK public finances data, the prelim Eurozone consumer confidence release and the latest ECB bank lending survey.

TUESDAY DATA CALENDAR

Date	GMT/Local	Impact	Flag	Country	Event
23/01/2024	0300/1200	***		JP	BOJ policy announcement
23/01/2024	0700/0700	***		UK	Public Sector Finances
23/01/2024	1330/0830	**		US	Philadelphia Fed Nonmanufacturing Index
23/01/2024	1355/0855	**		US	Redbook Retail Sales Index
23/01/2024	1500/1600	**		EU	Consumer Confidence Indicator (p)
23/01/2024	1500/1000	**		US	Richmond Fed Survey
23/01/2024	1630/1130	**		US	US Treasury Auction Result for 52 Week Bill
23/01/2024	1630/1130	*		US	US Treasury Auction Result for Cash Management Bill
23/01/2024	1800/1300	*		US	US Treasury Auction Result for 2 Year Note
24/01/2024	2145/1045	***		NZ	CPI inflation quarterly
24/01/2024	2200/0900	***		AU	Judo Bank Flash Australia PMI
24/01/2024	2350/0850	**		JP	Trade