MNI US MARKETS ANALYSIS - 10yr Supply on Tap Amid Heavy Fedspeak

US TSYS: Fedspeak and 10Y Supply In Driving Seat

• Cash Tsys are holding 2.5-3.5bps richer as they remain within yesterday’s range and not notably different to pre-Powell levels after two-way reaction as markets assessed a broad continuation of data dependency guidance. A stacked Fedspeak schedule and 10Y auction are in focus today whilst data takes a backseat.
• 2YY -2.7bps at 4.438%, 5YY -3.5bps at 3.799%, 10YY -3.4bps at 3.640% and 30YY -2.4bps at 3.689%.
• TYH3 trades 8+ ticks higher at 113-16 within yesterday’s range. A bear cycle is still in play with support at 113-05+ (yesterday low) whilst resistance is eyed at the 50-day EMA of 114-03.
• Fedspeak: NY Fed Williams (0915ET), Gov Cook (0930ET), VC Supervision Barr and Bostic (1000ET), Kashkari (1230ET) and Gov Waller (1345ET).
• Data: weekly MBA mortgage data (0700ET) and final wholesale inventories for December (1000ET).
• Bond issuance: US Tsy $36B 10Y Note auction (91282CGM7) – 1300ET. JPM late yesterday saw it requiring further concession with yields still too low relative to fundamental drivers.
• Bill issuance: US Tsy $36B 17W Bill auction – 1130ET

STIR FUTURES: Little Change Post Powell, Three ‘New’ Speakers Ahead

• Fed Funds implied hikes little changed from levels before and ultimately after Powell yesterday.
• 25.5bp for Mar (-0.5bp on the day), cumulative 45bp for May (-0.5bp), 55bps to terminal 5.14% Jul (-1.5bp) and 33bp of cuts to 4.80% Dec (-2.5bp).
• Fedspeak: Six speakers lined up with first post-FOMC/payrolls appearances from voters Williams, Cook and Waller (latter with text).

EUROPE ISSUANCE UPDATE:

• A fairly average 15-year gilt auction. The bid-to-cover was marginally higher than seen in December (we had expected it to be a bit higher than today's result) and the tail was 0.7bp - wider than the 0.2bp that we have seen for this gilt earlier in the fiscal year. The LAP also came in lower than seen in the market 5 minutes before the auction.
• GBP2bln of the 1.125% Jan-39 Gilt. Avg yield 3.736% (bid-to-cover 2.42x, tail 0.7bp).

• A slightly disappointing 7-year Bund auction. Other than the two minutes leading up to the auction close, the 45 minutes before the auction close didn't see the market price dip below 98.483. The average price achieved at auction was 98.48. Despite a relatively tight tail, this means that the lowest accepted price of 98.47 was lower than the market price through the auction.
• The bid-to-cover was also lower than seen in November, although there was more allotted at today's auction.
• E4bln (E3.379bln allotted) of the 2.10% Nov-29 Bund. Avg yield 2.34% (bid-to-cover 1.27x).

Portugal auction result

• E1bln of the 1.65% Jul-32 OT. Avg yield 3.172% (bid-to-cover 2.34x).

FOREX: Dollar Returns to Post-Powell Lows

• The greenback is flagging ahead of the NY crossover Wednesday, slipping against most others in G10 as markets extend the reaction the appearance from Fed's Powell on Tuesday. Powell's comments continued to underline the Fed's apparent belief that inflation has peaked, and disinflationary trends will extend through the rest of 2023, however more tightening steps may be required to reinforce this backdrop.
• NOK sits at the other end of the G10 table, stabilising after slipping sharply alongside the SEK over the past week or so. EUR/NOK remains within range of the 11.1535 cycle high, but the two-day pullback in the cross has allowed technically overbought conditions to unwind. Focus turns to this Friday's Norwegian CPI release, which should feed directly into the next round of Norges Bank projections in March.
• GBP/USD also sits somewhat higher, stressing the importance of the 200-dma as support, which successfully contained last week's slip lower in the pair. The level crosses at 1.1948, with 1.2194 marking the next upside level.
• Wednesday's not a busy session for data releases, which should keep focus on the busier speaker slate. 2023 FOMC voters Williams, Cook, Barr, Kashkari and Waller are all slated to make appearances, which should keep markets busy for the duration.
• ECB's Knot appears at a webinar with MNI, while the Bank of Canada's first minutes release is also on the docket.

FX OPTIONS: Expiries for Feb08 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0500-15(E759mln), $1.0735-50(E1.3bln), $1.0800-15(E621mln)
• USD/JPY: Y130.00($595mln), Y132.85-00($801mln)
• EUR/JPY: Y140.25-26(E1.3bln)
• EUR/GBP: Gbp0.8850-70(E825mln), Gbp0.8900(E673mln), Gbp0.8950(E501mln)
• AUD/USD: $0.7190(A$1.4bln)
• USD/CNY: Cny6.6500($650mln), Cny6.7390-00($869mln)

BONDS: Speakers Take the Stage Ahead of Tomorrow's German HICP

• Core fixed income has traded sideways in the European morning session and stayed to fairly tight ranges relative to recent sessions. Treasuries are off their overnight highs with the market reversing some expectation of future cuts (but the terminal rate remaining fairly steady). Gilts and Bunds are both a bit lower on the day.
• Looking to today's events we have appearances from Fed's Williams, Cook, Barr, Bostic, Kashkari and Bostic as well as the ECB's Knot giving an MNI webcast at 15:00GMT / 10:00ET (registration for the latter is available here).
• Markets will also start looking forward to tomorrow's delayed German HICP data release.

EQUITIES: Equity Futures Moderate Following Post-Powell Spike

• The EUROSTOXX 50 futures trend needle continues to point north. Resistance at 4206.00, the Jan 18 high, has been breached. The clear break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. A break of 4097.00, the Jan 19 low, would signal the start of a short-term bear cycle.
• The S&P E-Minis trend condition remains bullish. The contract traded higher last week and confirmed a resumption of the bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, the Dec 13 high, has been pierced. A clear break of this level would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support to watch lies at 4007.50, Jan 31 low. The latest pullback is considered corrective.

COMMODITIES: WTI Futures Target 78.34 50-Day EMA to Ease Bearish Pressure

• A sharp sell-off last Friday in WTI futures reinforced bearish conditions. The move lower Monday resulted in a print below $72.74, the Jan 5 low and a key support. A clear break of it would strengthen the bearish theme and expose $70.56, Dec 9 low and a bear trigger. Prices have recovered this week but gains are considered corrective. Initial firm resistance to watch is at $78.34, the 50-day EMA. A break would ease bearish pressure.
  
• Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Thursday and Friday last week and sights are on the 50-day EMA, at $1854.4. This average represents a key support and if breached, would strengthen a bearish case and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, has been defined at $1959.7, the Feb 2 high.