MNI US MARKETS ANALYSIS

US TSYS SUMMARY: Attention On Fed-Treasury Fissures

Tsys are well off overnight highs, with attention firmly on the Fed following last night's ructions with the US Treasury over the fate of emergency lending programs.

• Dec 10-Yr futures (TY) up 2.5/32 at 138-14 (L: 138-12.5 / H: 138-20). Curve's mixed: 2-Yr yield is up 0.2bps at 0.1634%, 5-Yr is up 0.7bps at 0.3795%, 10-Yr is up 1.1bps at 0.8406%, and 30-Yr is up 0.6bps at 1.5511%.
• Thursday's post-NY close news that Treas Sec Mnuchin Thursday told Fed it would let COVID emergency lending facilities expire at year-end rather than be extended saw Tsys rally into Asia-Pac trading, but that move has been largely reversed.
• Relief was provided as it was noted the Treasury would target the freed-up funds for PPP grants, and would agree to extend other facilities (such as Commercial Paper).
• Still, with the Fed pushing for an extension of programs into 2021, expect to hear more about this fissure in coming days and how it may impact the December FOMC decision.
• On that note, today's Fed speakers include Chicago's Evans (0830ET on CNBC), Dallas' Kaplan (also 0830ET), Richmond's Barkin and Atlanta's Bostic (0900ET), and KC's George (1330ET).
• Dearth of data today and no supply, but we get a fairly sizeable $12.8bn in NY Fed operational purchases at the short-end (0-2.25Y).

BOND SUMMARY: EGB/Gilt

European sovereign bonds have traded a touch firmer this morning with overall price action relatively contained alongside incremental equity gains.

• Gilts trade close to unch on the day. The Dec-20 gilt future trades at 134.99, 5 ticks off yesterday's close.
• The bund curve has marginally steepened with the 2s30s spread 1bp wider.
• OATs trade broadly in line with bunds and little changed on the day.
• The EU has indicated that the UK government has not adjusted its position sufficiently to help overcome the remaining negotiating issues that stand in the way of a Brexit trade deal. This follows the temporary hiatus in face-to-face meetings after an EU negotiator tested positive for coronavirus.
• The UK DMO earlier sold GBP1.75bn of 1-/3-/6-month T-Bills.
• UK retail sales (ex auto) for October came in above expectations (7.8% Y/Y vs 5.9% survey). Public sector finance data confirm that the UK government is on course to borrow a record amount this year.

DEBT SUPPLY

DMO sold GBP1.75bln in 1-/3-/6-month T-bills

• GBP500mln Dec 21 T-bill, avg yield -0.0511% (-0.0468%), cover 3.20x (5.72x)
• GBP500mln Feb 22 T-bill, avg yield -0.1020% (-0.0933%), cover 6.32x (8.76x)
• GBP750mln May 24 T-bill, avg yield -0.0825% (-0.0690%), cover 5.88x (4.75x)

Next week's bill auctions, 3mo and 6mo upsized:

• GBP0.50bln 1-month
• GBP1.00bln 3-month (was 0.50bn)
• GBP1.50bln 6-month (was 0.75bn)

OPTIONS

EUROZONE

Schatz p fly trading for more

DUG1 112.30/20/00 broken put fly, bought for 1.5 in close to 40k total

Large Schatz fly

DUG1 112.30/20/00 broken put fly, bought for 1.5 in 15k total (so far)

Schatz downside fly

• Same fly in Feb was bought for 1.25 in 5k yesterday

FOREX SUMMARY

EUR has seen broader base selling during our early European session.

• The currency touched low of the session against USD, GBP, CNH, CAD, JPY, AUD and is underperforming against all majors besides the SEK
• GBP came under early pressure following report that EU envoys briefed that the UK hasn't moved on 3 main hurdles.
• Cable moved from 1.3269 down to 1.3251, but since recovered after a round of Equity buying hit our screens, with the move higher related to index option expiry.
• Cable is back at 1.3272 at the time of typing
• AUDNZD resumed its downside momentum through lowest levels seen since April 2018, but failed to break the psychological 1.0500 area.
• Looking ahead, we have no data of note, although we still have few more speakers scheduled, including ECB Weidmann, and Fed Kaplan, Barkin and George.
• ALL EYES remains squarely on Brexit, Covid, and US Election certification count going into next week

TECHS: Key Price Signal Summary

• E-Mini S&P futures still trade below resistance at 3668.00, Nov 9 high. A break would resume the uptrend to open 3699.03, a Fibonacci projection. Price action on Nov 9 is a shooting star candle and still reversal warning to bulls. Watch 3506.50, Oct 11 low and key support.
• EURUSD directional triggers at 1.1920, Nov 9 high and 1.1746, Nov 11 low remain intact. A break of 1.1920 resumes the uptrend. On the downside, 1.1603, Nov 4 low is exposed if 1.1746 gives way.
• USDJPY key support lies at 103.18, Nov 11 low and in EURJPY, support lies at 122.69, the Nov 9 low.
• EURGBP trendline resistance is 0.9027, drawn off the Sep 11 high. The trend direction remains down.
• FI resistance levels to watch:
  • Bund fut: 175.62 61.8% of the Nov 4 - 11 sell-off
  • Gilts: Have stalled ahead of 135.14, Nov 18 high.
  • Trendline resistance in Treasuries drawn off the Oct 2 has been cleared. 138-21+ is next resistance, 50-day EMA.
• Key support in Gold remains $1848.8, Sep 28 low and in Brent (F1) at $42.63 and WTI (F1) at $40.33, the Nov 13 lows.

EQUITIES: On The Front Foot

U.S. futures have regained the ground lost late in Thursday's session (after Treas Sec Mnuchin announced the intention to end key COVID lending programs at year-end).

• Asian stocks closed mixed, with Japan's NIKKEI down 106.97 pts or -0.42% at 25527.37 and the TOPIX up 0.98 pts or +0.06% at 1727.39. China's SHANGHAI closed up 14.639 pts or +0.44% at 3377.727 and the HANG SENG ended 94.57 pts higher or +0.36% at 26451.54.
• European equities are higher, with the German Dax up 42.81 pts or +0.33% at 13141.86, FTSE 100 up 41.62 pts or +0.66% at 6369.18, CAC 40 up 29.31 pts or +0.54% at 5498.62 and Euro Stoxx 50 up 14.62 pts or +0.42% at 3471.92.
• U.S. futures are down slightly, with the Dow Jones mini down 65 pts or -0.22% at 29378, S&P 500 mini down 6.5 pts or -0.18% at 3573.5, NASDAQ mini down 4.5 pts or -0.04% at 11982.75.

COMMODITIES: Copper Leads Broad Gains

Commodities are up across the board today with a risk-on cross-market tone prevailing and the USD trading mixed.

• WTI Crude up $0.02 or +0.05% at $41.76
• Natural Gas up $0.03 or +1.16% at $2.623
• Gold spot up $0.85 or +0.05% at $1867.54
• Copper up $3.6 or +1.12% at $325.6
• Silver up $0.14 or +0.59% at $24.1983
• Platinum up $2.36 or +0.25% at $955.39