MNI US MARKETS ANALYSIS - Curve Bear Flattens as Stocks Hold Key Psychological Level

US TSYS: Tsys Bear Flattening, With A May Fed Hike Back On The Table

The Treasury curve has been bear flattening overnight, with equities stabilizing on diminished fears of banking sector stresses.

• Along with First Citizens' takeover of SVB, a Bloomberg sources piece published over the weekend ("US Mulls More Support for Banks While Giving First Republic Time") has lightened the mood, and S&P futures have been clinging on to 4,000 so far this morning.
• 2Y Tsy yields have moved through the overnight high (3.9128%), hitting 3.9255% just before 0600ET, back to levels last seen late last Thursday morning (up 16bp on the day). 10Y yields meanwhile up 9bp at session high 3.4658%.
• We're back to about 50/50 chance of a 25bp Fed hike at the May meeting, vs Friday's low implying a pause.
• End-year Fed funds is priced 22bp higher at 4.11%, vs a Friday low of 3.56% - so about 82bp of cuts implied from peak-to-end-2023, vs well over 100bp seen last week.
• The weekend's Fed communications highlight was Kashkari saying banking sector stresses "brings us closer" to recession but that it's too soon to tell what it meant for the May FOMC decision.
• Today's lone scheduled speaker is Gov Jefferson discussing monetary policy at 1700ET.
• Supply is highlighted by $42B 2Y Note sale.
• A thin data slate to start the week, with Dallas Fed Manufacturing at 1030ET.

Syndication: 2.625% Feb-48 Green EU-bond

"The EU (EUROPEAN UNION) has mandated BofA Securities, Deutsche Bank, J.P. Morgan, Nomura and Nordea as Joint Lead Managers for its upcoming green EUR Fixed Rate RegS Bearer tap of the existing 2.625% benchmark due 04 Feb 2048 bond (EU000A3K4DM9)."

Via Bloomberg

FOREX: USD Dip Short-Lived, Sentiment Remains the Key Driver

• The USD faded in early Europe Monday as European equities got off to a strong start thanks to a bounce in bank shares. The likes of Deutsche Bank, BNP Paribas and others surged at the open to erase a decent portion of the losses suffered Friday, while CDS spreads tightened.
• The dip in the greenback proved short-lived, however, with the stability fading through toward the NY open as the e-mini S&P dipped back into negative territory. As a result, haven currencies including the JPY are off the lowest levels of the day, although remain in negative territory since the resumption of trade Sunday night.
• The sole release of the morning was Germany's March IFO data, wich came in just ahead of expectations - but left little market impact. Volumes are generally below average for this time of day after several more frantic sessions, with most currency futures pointing to subpar activity ahead of NY hours.
• Data releases are few and far between Monday, keeping focus on the speaker slate as ECB's Nagel, Elderson, Centeno and Schnabel are on the docket. BOE's Bailey is also set to testify on the purchase of SVB UK by HSBC and Fed's Jefferson speaks on monetary policy after the market close.

FX OPTIONS: Expiries for Mar27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0785(E700mln), $1.0800(E1.0bln)
• USD/JPY: Y130.00-10($606mln), Y130.50-60($1.1bln)
• GBP/USD: $1.2300(Gbp636mln)
• USD/CAD: C$1.3660($500mln)

EQUITIES: Headline Future Indices Dip Despite Support From Bank Names

• Eurostoxx 50 futures remain below last week’s high of 4164.00 on Mar 22 high. The pullback threatens the recent bull theme and signals the possible end of what appears to have been a corrective bounce. A continuation lower would open 4009.50, 61.8% of the Mar 20 22 rally. A move below the 4000.00 handle would expose 3914.00, the Mar 21 low and bear trigger. Key short-term resistance is 4164.00, the Mar 22 high. A break would be bullish.
• S&P E-Minis reversed sharply lower last Wednesday. The move down means that price has - so far - failed to remain above pivot resistance at the 50-day EMA. The EMA intersects at 4020.71 and price is again testing this level today. A clear break of it is required to strengthen bullish conditions. Support today lies at 3937.00, the Mar 24 low. A breach would open 3897.25 next, the Mar 20 low. Key short-term resistance is at 4073.75, the Mar 22 high.

COMMODITIES: Gold Technical Conditions Bullish Despite Short-Term Pullback

• WTI futures remain in a downtrend and last week’s recovery appears to be a correction. Note that the latest move higher has allowed a recent oversold condition to unwind. Firm resistance is seen at $72.51 the 20-day EMA. Recent weakness confirmed a resumption of the broader downtrend and has paved the way for a move towards $62.43, the Dec 2 2021 low. The bear trigger is $64.36, the Mar 20 low.
• Trend conditions in Gold remain bullish and the recent short-term pullback is considered corrective. The breach on Mar 17 of former resistance at $1959.7, Feb 2 high, confirmed a resumption of the bull trend that started late September 2022. The test above $2000.0 opens $2034.0 next, a Fibonacci projection. $1918.3 is seen as a firm support. It is the Mar 17 low and a break would signal scope for a deeper pullback.