MNI US MARKETS ANALYSIS - Equities Holding Bulk of Monday Rally

US TSYS SUMMARY: Tsys Bounce Ahead Of More Fed Speakers, 2Y Auction

Treasuries have bounced from overnight lows for the second consecutive European session, with the curve now bull flatter. Fed speakers (including Chair Powell) and 2Y supply are the session's focal points.

• The 2-Yr yield is down 0.8bps at 0.2464%, 5-Yr is down 1.1bps at 0.8764%, 10-Yr is down 1.9bps at 1.47%, and 30-Yr is down 2.6bps at 2.0838%.
• Sep 10-Yr futures (TY) back toward the top of the session's range, up 2.5/32 at 132-09 (L: 132-00.5 / H: 132-10) - well within Monday's range though and on merely decent volume (~315k).
• Dollar's stronger (DXY+0.2%) with stock futures consolidating after Monday's bounce.
• Fed's Powell gives congressional testimony at 1400ET; the prepared portion was released Monday but little new there vs the FOMC press conference last week.
• Other Fed speakers include NY's Williams (0925ET on BBG TV), Cleveland's Mester (1030ET) and SF's Daly (1100ET), the latter two with text and Q&A.
• In supply, 1130ET is $40B 42-day bill auction, with $60B 2Y Notes selling at 1300ET.
• Data includes existing home sales and Richmond Fed mfg at 1000ET.

EGB/GILT SUMMARY: Reversing Early Losses

European government bonds initially traded weaker soon after the open, before then paring losses and trading above yesterday's close.

• The gilt curve has bull steepened with the 2s30s spread 1bp wider.
• UK public borrowing data came in better than expected for May (PSNBR GBP23.6bn vs GBP25.5bn expected) as the economic recovery gains ground, although the government is still looking into ways to bolster public finances with the Telegraph yesterday reporting that officials are looking into potential pension tax reforms.
• Following the initial selling, bunds are now back to unch on the day with the curve flat overall.
• OATs have mirrored the move in bunds with cash yields broadly 1bp lower.
• Spain launched EUR8bn of a 10-year bond while the Netherlands sold EUR1.96bn of the 4.00% Jan-37 DSL.

EUROPE OPTION FLOW SUMMARY

Eurozone:
RXN1 170/1695/169/168.5p condor, bought for 1 in 2.6k
RXQ1 170.5/173^^ sold at 85.5 in 2k

ERH2 100.50/62/75c fly bought for 3 in 6k (carry trade)
ERU2 100.50/62/75c fly sold at 2.5 in 6k
3RU1 100/99.875ps, sold at 1.5 in 2k
3RH2 100.00p sold at 13.25 in 4k (ref 100.04, 45% del)

UK:
3LZ1 9900/9875ps sold at 7.25 in 4k (ref 99.07)

US:
USQ1 157p, bought for 41 in 4,243

EUROPE ISSUANCE UPDATE: Spanish Syndication, Netherlands DSL Auction

Spain 10y launched for E8bln
Maturity: 31 October 2031
Final spread (set earlier) at 0.85% Apr-31 Obli + 8bp (initial guidance had been + 10bps area)
Books closed >E74bln (incl. E6.71bln JLM trading interest)

Netherlands sells E1.96bln 4.00% Jan-37 DSL, Avg yield 0.142%, Price 159.33 vs. Pre-auction mid 159.25

FOREX: GBP Rolls Off Monday's High, 100-dma Proves Worthy

• GBP is the softest currency in G10 so far Tuesday, with GBP/USD rolling off the Monday high as markets reject gains ahead of the 1.3943 100-dma, which has switched from soft support to solid resistance. This keeps the balance of risks tilted lower given the downtrend posted since the start of June, raising focus on Monday's multi-month low of 1.3787.
• The greenback's weakness Monday proved temporary, with the dollar among the strongest in G10. The USD index has edged back above the 92.00 handle, leaving the Friday cycle high at 92.41 well within reach.
• US existing home sales and Richmond Fed Manufacturing Index are the data highlights as well as Eurozone advance consumer confidence for June. Central bank speakers worth watching include ECB's Rehn, Lane and Schnabel as well as Fed's Mester Daly and Powell's testimony to Congress.

FX OPTIONS: Expiries for Jun22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2175(E536mln), $1.2220-25(E1.4bln-EUR puts)
• USD/CNY: Cny6.28($600mln), Cny6.35($600mln)

Price Signal Summary - S&P E-Minis Finds Support At The 50-Day EMA

• In the equity space, S&P E-minis tested the 50-day EMA yesterday. The average has provided support and yesterday's strong close signals scope for a resumption of gains. Key support has been defined at 4126.75, Jun 21 low. This level also represents a key short-term pivot support. The bull trigger is 4258.25, last week's t high.
• In FX, EURUSD remains weak following last week's sharp sell-off and gains are considered corrective. The focus is on 1.1837 next, 76.4% of the Mar 31 - May 25 rally. GBPUSD remains vulnerable following last week's bearish pressure and despite yesterday's gains. The pair has probed 1.3800 and this signals scope for 1.3717 next, Apr 16 low. USDJPY traded higher last week and breached 110.33, Jun 4 high. This reinforces a bullish theme with the focus on 110.97, the year high on Mar 31. Support to watch is at 109.72, yesterday's low.
• On the commodity front, Gold remains weak and the focus is on $1756.2, low Apr 29. Upticks are considered corrective. {7I} Oil on the other hand has resumed its uptrend. Support in Brent (Q1) has been defined at $72.01, the Jun 17 low. The focus is on $75.60, Apr 25 2019 high (cont). WTI (N1) focus is on $74.47, 3.50 projection of Mar 23 - 30 - Apr 5 price swing. Support to watch lies at $69.77, Jun 17 low.
• Within FI, Bund futures are trading lower today and have probed support at 171.80, Jun 17 low. A stronger pullback would expose 170.99, Mar 31 low and a key short-term support. 173.16, the Jun 11 high is key resistance. Key support to watch in Gilt futures is unchanged at 126.70, Jun 3 low.

EQUITIES: Stocks Hold Monday Recovery, Resistance In Tact

• US futures are consolidating, but are holding the vast majority of the Monday recovery, with the e-mini S&P just 10 points or off the overnight high. Futures point to a broadly unchanged open later today, with resistance looking fairly strong on any rally toward last week's best levels.
• Across Europe, headline indices trade either side of unchanged, with the UK's FTSE-100 higher by 0.2% (on GBP weakness), while peripheral Italian and Spanish markets lag, lower by around 0.5% apiece.
• Europe's real estate and energy sectors are best performers so far, although gains are countered by weakness in consumer discretionary and healthcare names.

COMMODITIES: Oil Edges Off Highs, With Markets Wary of OPEC+ Supply

• Both WTI and Brent crude futures trade in minor negative territory early Tuesday, with both benchmarks rolling off their respective cycle highs.
• Focus this morning has been paid to numerous delegate comments from OPEC+, which raised the prospect of further reversing of oil supply cuts from August - which marks their next meeting. Russia are said to be in favour of a increase in oil supply, with the country's Deputy PM meeting with oil company heads this week to assess the state of the energy market.
• Gold and silver both trade either side of unchanged, with gold eyeing the overnight highs of $1790.2 initially ahead of the 20-day EMA at $1844.8. Nonetheless, the outlook remains tilted bearish following the clear breach of the 50-day EMA. Attention is on $1756.2, Apr 29 low and $1733.5, a Fibonacci retracement.