MNI US MARKETS ANALYSIS - EGB Yields Surge, German 10y Hits Highest Since 2011

US TSYS: Carry-Over Selling on Persistent Inflation

• Tsy Mar/Jun roll winding down (over 90% complete), June takes lead quarterly tomorrow. Month-end may present additional rebalancing related trade.
• Economic data kicks off the week (modest reprieve from data-event risk this wk on net) with Durable Goods Orders (5.6%, -4.0%), ex-trans (-0.2%, 0.2%) and Cap Goods Orders Nondef Ex Air (-0.1%, -0.1%), ship (-0.6%, 0.0%) release at 0830ET. Pending Home Sales MoM (2.5%, 1.0%), YoY (-34.3%, --) at 1000ET and Dallas Fed Mfg Activity (-8.4, -9.3) at 1030ET.
  
• Scheduled Fed-speaker: Gov Jefferson on inflation, Fed mandate, text, Q&A at 1030ET. Boston Fed President Susan Collins said Friday she sees the need for more rate increases amid high inflation and then likely holding there for an extended period of time.
• Tsy issuance: $60B 13W, $48B 26W bill auctions today at 1130ET.
• Geopol risk: Eye on US/China tensions after US Plane In Taiwan Strait 'Disrupts Regional Situation': MNI (London)-Comments from the Chinese military stating that it has closely monitored a US military P-8A aircraft as it traversed the Taiwan strait.

Post-LIBOR Settle Update: Implied Hikes Inch Higher

Lead quarterly Mar'23 (EDH3) -0.010 to 94.915 after 3M LIBOR set' climbs +0.00900 to new 16 year high to 4.96243% this morning (+0.03814 total last wk).

• Fed funds implied hike for Mar'23 at 30.1bp, May'23 cumulative 57.2bp to 5.154%, Jun'23 75.3bp to 5.334%, terminal at 5.41-5.415% in Aug'23-Oct'23.
• Balance of Eurodollar Whites (EDM3-EDZ3) -0.005-0.025, Reds (EDH4-EDZ4) -0.040-0.055, Greens (EDH5-EDZ5) -0.030 to steady, Blues through Golds (EDH6-EDZ7) +0.010-0.025.
• Current deferred spds vs. prior settles - continue to widen:
  • Jun'23/Sep'23: +0.150 vs. +0.145
  • Mar'23/Red Mar'24: +0.135 vs. +0.105
  • Jun'23/Red Jun'24: -0.720 vs. -0.770
• Friday's "hot" PCE data spurred continued interest in rate hike put insurance, particularly in SOFR options.

FOREX: AUD Downtrend Accelerates as US Curve Inverts Further

• Currency markets are more stable at the NY crossover despite a shakier start - a move which resulted in fresh highs for the greenback during Asia-Pac trade. The fresh high for the USD Index extends the currency's February winning streak, putting prices within range of 105.631, the January and YTD highs.
• Fixed income markets have been the focus so far this week, with yields at the belly of the curve seeing further upside pressure and putting the German 10y yield at the highest level since the wake of the Global Financial Crisis in 2011. In the US, curve inversion persists, with the short-end selling off at a faster pace to put 2yr yields higher by 3 bps vs 10y yield's 1.5bps gain.
• GBP/USD's pullback low at 1.1923 found support ahead of the mid-February low at 1.1915 and staged a respectable recovery back above the 200- and 100-dmas at 1.1928 and 1.1950 respectively.
• The poorest performers across G10 are AUD and NZD, which has resulted in an extension of the AUD/USD downtrend posted last week. AUD/USD has now solidly broken through 100-dma support at 0.6729, putting the pair at the lowest levels since January and within range of YTD lows at 0.6688.
• Prelim durable goods orders and pending home sales for January. The central bank speakers slate should prove to be of interest, with Fed's Jefferson, ECB's de Cos and ECB's Lane on the docket.

FX OPTIONS: Expiries for Feb27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0455-62(E757mln), $1.0500(E1.5bln), $1.0550-65(E1.0bln), $1.0600(E625mln), $1.0695-00(E1.2bln)
• USD/JPY: Y132.80-00($1.1bln), Y137.00($1.0bln)
• AUD/USD: $0.6680(A$1.1bln), $0.6800(A$1.1bln), $0.6930-50(A$539mln)
• USD/CAD: C$1.3595-05($1.0bln)

Price Signal Summary - Trend Needle In Gold Points South

• On the commodity front, trend conditions in Gold remain bearish and price is still trading below the 50-day EMA, at $1848.8. The break of this EMA, in mid-February, strengthened the case for bears. Sights are set on the $1800.0 handle and $1787.3, the 50.0% retracement of the uptrend between Sep 28 and Feb 2. On the upside, the 50-day EMA marks the first key short-term resistance.
• In the Oil space, WTI futures remain above last week’s lows and key short-term support has been defined at $73.80, the Feb 22 low. Moving average studies are in a bear-mode position and for now, this suggests potential for a continuation lower near-term. A break of the $73.80, would open $72.64, the Feb 6 low. Initial resistance to watch is at $78.06, the 50-day EMA.

EQUITIES: E-Mini S&P Recovers Towards 4000.00 After Slipping to Feb Low Friday

• Eurostoxx 50 futures finished near the lows of the week, with the 4175 level the lowest print since early February. Last week, dip buyers emerged on Wednesday to contain any break lower, but the shallow bounce off the Friday lows suggests a lower range to begin the week. Key support remains at 4097.00, the Jan 19 low. Major resistance holds at 4303.20, the 2.382 proj of the Sep 29 - Oct 4 rise from Dec 20 low.
• Further slippage Friday put the S&P E-Minis to fresh February lows, with weakness extending through the close. Last week’s price action put prices below first support at the 50-day EMA at 4024.94 and tilts the near-term view lower. 3901.75 marks next support, the Jan 19 low, although vol band support at 3940.3 could slow any decline. For the outlook to improve, bulls look for a close above the mid-week high at 4034.25.

COMMODITIES: WTI Futures Recover From Last Week's Lows

• WTI futures drifted lower into the Wednesday close, returning the outlook to neutral for now. Prices now sit back below the 50-day EMA, at $77.97, however the medium-term view remains unchanged. Key resistance remains at $82.66, the Jan 18 high. On the downside, initial firm support has been defined at $72.25, the Feb 6 low for the continuation contract.
• Trend conditions in Gold are bearish for now, with prices trading heavy on the resumption of trade. This marks an extension of the pullback after the strong sell-off on Feb 2 / 3 as well as the break of support at the 50-day EMA. The clear break strengthens the bearish case and suggests scope for a deeper pullback. Vol band support (the 2.0% 10-dma envelope), successfully contained prices so far, keeping the focus on the level this week.