MNI US MARKETS ANALYSIS: Focus Shifts To Payrolls

US TSYS SUMMARY: Stabilizing Ahead Of Payrolls

• Yields have eased off late Thurs/Asia Pac highs but still remain elevated vs pre-Powell, with the general dynamic having been rising real yields alongside falling breakeven inflation.
• The 2-Yr yield is down 0.8bps at 0.1369%, 5-Yr is down 1.3bps at 0.7773%, 10-Yr is down 2.1bps at 1.5435%, and 30-Yr is down 3.3bps at 2.2875%.
• Jun 10-Yr futures (TY) up 1/32 at 132-13.5 (L: 132-05.5 / H: 132-17).
• Equity futures still in the red alongside a stronger dollar, but off overnight lows.
• Feb employment report out at 0830ET. MNI dealer median for headline payroll growth is +200k, outliers being Citi +410k and on the other end, NatWest and RBC expecting contractions.
• 1500ET sees consumer credit data, along with the final scheduled Fed speaker scheduled pre-FOMC blackout this weekend: Atl's Bostic speaking on macroeconomic policy.
• No supply, but NY Fed buys ~$8.825B of 2.25-4.5Y Tsys.

EGB/GILT SUMMARY - PD Ructions, Vaccine Politics

European government bonds have traded broadly weekly alongside downside for equities and gains for the US dollar.

• The gilt curve has bear flattened with the cash yields 1-3 bp higher and the 2s30s spread 2bp narrower.
• Bunds opened weaker, but gradually clawed back early losses while still trading lower on the day. Cash yields are broadly 1-2bp higher.
• The OAT curve has bear steepened with the 2s30s spread 3bp wider.
• BTPs similarly traded weaker early into the session and have slowly recovered some losses. Last yields: 2-year -0.3374%, 5-year 0.0906%, 10-year 0.7404%, 30-year 1.685%.
• Fractures have started to emerge in Mario Draghi's government after head of Italy's PD, Nicola Zingaretti, resigned last night. Although the government holds a commanding majority in both house of parliament, it is clear that there is still some divisions over the technocratic administration.
• France's Health Minister Olivier Veran supported Italy's decision to ban the export of some Oxford/AstraZeneca Covid vaccines to Australia as the EU's vaccination drive continues to struggle.
• German factory orders for January came in better than expected (2.5% Y/Y vs 1.9% survey).
• Supply this morning came from the UK (Bills, GBP3.5bn).

UK ISSUANCE: DMO sold GBP3.5bln in 1-/3-/6-month T-bills

• GBP0.5bln Apr 6 T-bill, avg yield 0.0042% ( 0.0131%), cover 3.56x (3.29x)
• GBP1bln Jun 7 T-bill, avg yield -0.0003% (0.0072%), cover 3.52x (3.86x)
• GBP2bln Sep 6 T-bill, avg yield 0.0336% (0.0217%), cover 1.51x (2.52x)

Next week's bill auction amounts:

• GBP0.5bln 1-month
• GBP1.0bln 3-month
• GBP2.0bln 6-month

EUROPE OPTIONS FLOW SUMMARY

• 12:00:39 0LM1 99.75/99.625 put spread v 99.875 call, bought for 0.75 in 4.8k (+put spread)
• 0LZ1 99.75/99.87/100.00c fly, bought for 2.5 in 25k
• 2LJ1 99.50^, sold at 15.5 in 1k
• 2LZ1 98.87/99.87 RR, sold the put at 3 in 3k (ref 99.355)
• 3LJ1 99.25/99.12/99.00p ladder, sold at half in 4k
• 3LM1 99.00/98.75 put spread bought for 5 in 4.2k

FOREX SUMMARY: USD Buying Across The Board

A busy morning session for FX, with constant USD buying across the board.

• USDCHF tested that September double top at 0.9296, printed at 0.9311 high.
• Further upside continuation opens to 0.9330 initially (50% retrace).
• Further upside traction was seen through the early session with USD testing best levels versus EUR, JPY, CHF, GBP, SEK, SGD, THB, CZK, PLN, and turning bid against CNH, CAD, RUB, TRY, ZAR.
• The Kiwi and AUD are the worst performers in G10 against the Greenback, with risk better offered, a continuation post Fed Powell yesterday.
• NZD is down 0.79% and AUD 0.76%.
• AUD traded through the intraday low, and now eye support at 0.7651 Low Feb 8
• Cable has traded in a 100 pips range, and now trades at the bottom of the range close to 1.3800, now at 1.3806 at the time of typing.
• Looking ahead, US NFP and AHE.
• Speakers sees BoE Haskel and Fed Bostic are scheduled, and this will be the last day before US blackout ahead of the next Fed meeting.
• Rating, after market, Moody and DBRS on Spain

Expiries for Mar05 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1727(E1.1bln), $1.1900(E513mln), $1.2000(E764mln), $1.2035-55(E945mln-EUR puts), $1.2075(E547mln), $1.2100(E647mln)
• USD/JPY: Y106.40-60($2.0bln-USD puts), Y107.00-05($1.1bln), Y107.24-25($691mln)
• GBP/USD: $1.3995-00(Gbp650mln), $1.4080-00(Gbp516mln)
• EUR/GBP: Gbp0.8600(E700mln-EUR puts)
• EUR/SEK: Sek10.17(E603mln-EUR puts)
• AUD/USD: $0.7450(A$671mln), $0.7750-60(A$669mln-AUD puts), $0.7900(A$682mln)
• AUD/NZD: N$1.0475(A$600mln)
• USD/CAD: C$1.2500($960mln), C$1.2620-25($1.3bln), C$1.2640-55($670mln)
• USD/MXN: Mxn20.40($570mln)

Price Signal Summary - USD In Firm Bull Mode

• In the FX space, EURUSD is weaker again today and has cleared the key support at 1.1952, Feb 5 low.
  • This confirms a resumption of the downtrend that started January 6. Attention is on 1.1908, Nov 2 low and 1.1882, Nov 25 low.
• USDJPY continues to defy gravity and is through 108.00. The pair is approaching 108.54 Jun 9, 2020 high. Scope is also seen for a climb to 109.70 further out, Jun 8, 2020 high.
• Note that in the USD Index, key resistance at 91.60, Feb 5 high has been breached, reinforcing the current bullish USD sentiment.
• On the commodity front, Gold remains in a clear downtrend and has cleared $1700.00. This suggests scope for $1671.0, Jun 5, 2020 low. Oil contracts are firmer with fresh 2021 highs printed. Brent (K1) targets the psychological $70.00 handle next while WTI (J1) is approaching the next resistance at $65.65 - Jan 8, 2020 high (cont).
• In the FI space, recent gains in Bunds (H1) are still considered corrective. Wednesday's sell-off signals the potential end of this correction. Key resistance has been defined at 174.97, Mar 3 high. Gilts (M1) remains bearish. Scope is for a move towards 127.00. Resistance is at 129.27, Tuesday's high. Treasuries remain within the body of price action from Feb 25. In candle terms the pattern on this day is a bearish standard line - a continuation pattern. Attention is on 131-31, Feb 25 low. Key S/T resistance is at 134-06+, the Feb 25 high.
• In the equity space, the EUROSTOXX50 index remains below key resistance at 3742.53, Feb 15 high and the bull trigger. Key support to watch is at 3622.24, Feb 26 low. E-mini S&P futures remains heavy and this week's leg lower has exposed the key support at 3656.50, Feb 1 low

EQUITIES: Stocks Stable, But Close to Recent Lows

• Japan's NIKKEI down 65.79 pts or -0.23% at 28864.32 and the TOPIX up 11.44 pts or +0.61% at 1896.18
• China's SHANGHAI closed down 1.505 pts or -0.04% at 3501.987 and the HANG SENG ended 138.5 pts lower or -0.47% at 29098.29.
• The German Dax down 85.01 pts or -0.6% at 13970.27, FTSE 100 up 27.33 pts or +0.41% at 6679.04, CAC 40 down 21.11 pts or -0.36% at 5809.99 and Euro Stoxx 50 down 13.46 pts or -0.36% at 3691.35.
• Dow Jones mini up 24 pts or +0.08% at 30897, S&P 500 mini up 2.5 pts or +0.07% at 3767.75, NASDAQ mini down 15.5 pts or -0.12% at 12439.75.

COMMODITIES: Oil Higher Still as OPEC+ Buoy Prices Further

• WTI Crude up $1.6 or +2.51% at $65.51
• Natural Gas down $0 or -0.15% at $2.738
• Gold spot down $0.7 or -0.04% at $1696.24
• Copper up $9.1 or +2.29% at $407.35
• Silver down $0.01 or -0.04% at $25.3485
• Platinum down $4.92 or -0.44% at $1123.86