MNI US MARKETS ANALYSIS - CHF Within Range of Key Support Amid Broad Underperformance

US TSYS: Bouncing Back, Projected Rate Cut Pricing Continues to Ebb

• Cash Treasuries running firmer, yields 1-2bp lower are near mid-range for the overnight hours, curves steeper (2s10s +2.279 at -35.934). Treasury futures firmer but off early overnight highs after Jun'24 10Y futures gapped to 110-23.5 high on approximate volume of 21,000.
• Futures levels quickly pared half the move, no apparent catalyst for the initial bid but some desks contemplate month end extension trade ahead of the early week close for the Easter holiday. Current levels are near the middle of the overnight range, TYM4 at 110-21 (+4.5) with initial technical resistance at 110-30.5 (Mar 21/22 high).
• Another busy data and debt issuance day while scheduled Fed speakers are absent. Economic data includes Philly Fed Non-Mfg Activity and Durable/Capital Goods at 0830ET, FHFA House Price Index at 0900ET. Consumer Confidence and regional Fed data from Richmond and Dallas wraps up the day at 1000ET.
• US Treasury auctions continue with $70B 42D CMB bills at 1130ET and $67B 5Y Notes (91282CKG5) at 1300ET.
• Short end SOFR futures moderately weaker while projected rate cut pricing continues to ebb: May 2024 at -12.9% w/ cumulative -3.2bp at 5.296%; June 2024 -63.1% vs. -65.8% late Monday w/ cumulative rate cut -19.0bp at 5.139%. July'24 cumulative at -30.1bp, Sep'24 cumulative -48.8bp at 4.831%.

OI Points To Little Net Change In Broader Positioning On Monday

The combination of yesterday's move lower in Tsy futures and preliminary open interest data point to a mix of short setting and long cover that largely offset in net curve DV01 terms. Moves in individual contract OI were limited.

SOFR: OI Points To Mix Of Short Setting & Long Cover In SOFR Futures On Monday

The combination of yesterday's move lower in SOFR futures and preliminary OI data points to a mix of short setting and long cover, with the most notable OI movement coming via apparent net long cover in SFRM4 and apparent net short setting in SFRU4.

• Net pack OIs didn't see huge movement on the day, with net short setting prevailing in the whites, reds and blues, while net long scover seemed to dominate in the greens.
• FOMC-dated OIS remained within familiar ranges on the day, as Fedspeak, bond supply and a rally in oil prices were assessed,

EUROPE ISSUANCE UPDATE:

Dutch DSL auction results

• E1.975bln of the 0% Jan-29 DSL. Avg yield 2.544%.

• A strong short 5-year gilt auction - as we had expected given the smaller size (GBP3bln versus GBP4bln so issuance doesn't overshoot the FY23/24 shorts target). The price of the 4.50% Jun-28 gilt has hit its intraday high (102.190) following the publication of the results. Note that this is the last time the 4.50% Jun-28 gilt will be sold ahead of the launch of the new 5-year gilt next month.
• GBP3bln of the 4.50% Jun-28 Gilt. Avg yield 3.928% (bid-to-cover 3.48x, tail 0.3bp).

• E1bln (E915mln allotted) of the 0% Oct-25 Green Bobl. Avg yield 2.92% (bid-to-offer 2.30x; bid-to-cover 2.52x)
• E1bln (E943mln allotted) of the 2.30% Feb-33 Green Bund. Avg yield 2.3% (bid-to-offer 2.17x; bid-to-cover 2.30x).

FOREX: Month-End Flow Could be Patchy, Value Date Tuesday

As we wrote yesterday, month-end FX flows could be inconsistent and patchy due to month-end value date today, and the limited market openings on Friday due to easter. Ahead of month-end, most sell-side eye moderate USD sales into the end of March:

• Barclays write that their model indicates moderate USD selling signal against most majors. They also note that all signals except for USDJPY are borderline between moderate and weak.
• Citi also see moderate USD selling, and the instance of month-end value date Tuesday could mean markets see corporate USD demand in early NY hours.
• Credit Agricole write that equity market performance this month suggests month-end portfolio rebalancing flows in favour of mild USD sales, with the strongest sell-signal USD vs. SEK. Separately, their corporate flow model points to EUR sales. These two models combined therefore favour selling the USD vs. an equally-weighted basket of G10.

FOREX: CHF Weakness Brings Major Levels in USD/CHF, EUR/CHF Into Play

• CHF is the poorest performing currency so far Tuesday, helping EUR/CHF narrow the gap with the key upside level and bull trigger at 0.9788. A break of this level, along with 0.9020 in USD/CHF could unlock the next stage of weakness for the CHF after last week's surprise SNB rate cut, at which the bank became the first in G10 to ease monetary policy after the post-pandemic tightening cycle.
• We wrote yesterday that while the AUDUSD technical theme remains bearish, exponential moving average indicators appear positive for AUDCHF, and the dovish SNB combined with the overall buoyant backdrop for global equities could point to further strength ahead for the cross.
• NZD fares better on an intraday basis, gaining off recent pullback lows to re-take the 0.60 handle and stabilise just below the 200-dma. This level, just above at 0.6076, marks the next upside resistance of note.
• Focus for the duration of the Tuesday sessions rests on the prelim US durable goods orders data for February ahead of the March consumer confidence release. The central bank speaker schedule is thinner, with just BoC's Wilkins set to speak later today.

FX OPTIONS: Expiries for Mar26 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0785-00(E2.0bln), $1.0860-70(E4.1bln), $1.0925-35(E2.9bln)
• USD/JPY: Y151.00($529mln), Y151.25($632mln)
• GBP/USD: $1.2685-00(Gbp983mln)
• AUD/USD: $0.6500(A$726mln), $0.6545-60(A$3.2bln)
• AUD/NZD: N$1.0825(A$639mln)
• NZD/USD: $0.6170(N$695mln)

EQUITIES: Eurostoxx 50 Futures Trade Either Side of 5000.00 Handle

• A bullish trend condition in Eurostoxx 50 futures remains intact and the contract is trading closer to its recent highs. Last week’s cycle high confirmed once again a resumption of the uptrend and resulted in a break of the 5000.00 handle. Moving average studies remain in a bull-mode position, highlighting positive market sentiment. Sights are on 5074.7, a Fibonacci projection. Initial firm support is at 4915.20, the 20-day EMA.
• The trend condition in S&P E-Minis is unchanged and remains bullish. Last week’s extension reinforces this theme and the break of 5257.25, Mar 8 high, confirmed a resumption of the uptrend. Note that moving average studies remain in a bull-mode position reflecting positive market sentiment. Sights are on 5398.12, the top of a bull channel drawn from the Jan 17 low. Initial firm support is 5213.02, the 20-day EMA. A move lower is considered corrective.

COMMODITIES: WTI Futures Continue Steady Climb Toward Resistance at $83.87

• A bull theme in WTI futures remains intact and the latest pullback is considered corrective. Recent gains resulted in a break of $79.87, the Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $83.87 next, the Oct 20 ‘23 high. A break of this level would open $84.87, the Sep 15 ‘23 high and a key resistance. Support to watch is $79.64, the 20-day EMA.
• The trend condition in Gold remains bullish and last week’s move higher reinforces this condition. The initial rally on Mar 21, delivered another all-time high and confirmed a resumption of the primary uptrend. Moving average studies remain in a bull-mode condition, reflecting positive market sentiment. This signals scope for a climb towards $2230.1, a Fibonacci projection. Key short-term trend support has been defined at $2146.2, the Mar 18 low.