MNI US MARKETS ANALYSIS - Focus On Georgia Results

US TSYS SUMMARY: Georgia Results Sink Tsys On Heavy Volumes

The curve has sharply bear steepened with the 10-Yr Tsy yield pushing above 1% for the first time since March, with more fiscal stimulus eyed after apparent Democratic wins in both Georgia Senate runoffs.

• Mar 10-Yr futures (TY) down 18/32 at 137-9 (L: 137-06 / H: 137-29.5). One-way traffic lower on huge volumes (~800k traded).
• The 2-Yr yield is up 1.4bps at 0.1349%, 5-Yr is up 4.3bps at 0.4194%, 10-Yr is up 6.9bps at 1.0237%, and 30-Yr is up 8bps at 1.7876%.
• Though there have been no concessions yet, bookmakers imply 99+% probability of Democrats winning both GA seats and taking control of the Senate. Alongside Tsys selling off, tech stocks and the USD are weaker (as had been the predicted reaction in a Dem double-win scenario).
• House meets at 1200ET, Senate at 1230ET prior to 1300ET joint session of Congress to count presidential electoral votes, with objections from some Republican Senators eyed.
• Apart from politics, a busy data slate: Dec ADP employment (0815ET), final Svcs PMI (0945ET), Nov Factory Orders/final Durable Goods (1000ET) lie ahead.
• We also get the Dec FOMC minutes at 1400ET. We'll put out a brief preview later.
• In supply, $55B of 105-/154-day bills at 1130ET

BOND SUMMARY: EGB/GILT

European sovereign bond markets have sold off this morning with curves generally bear steepening alongside fresh gains for equities and broad USD weakness against G10 FX.

• Gilts have underperformed. Cash yields are 2-5bp higher on the day with the curve 3bp steeper.
• Bunds have similarly traded weaker with the longer end underperforming. The 2s30s spread has narrowed 2bp.
• OAT yields have edged up 1-2bp across the curve.
• Supply this morning came from Germany (Bund, EUR4.1bn allotted)
• The Spanish services and composite PMI readings for December were better than expected but still in contraction territory, while Italy suffered significant misses, particularly for services (39.7 vs 45.0 survey). Elsewhere, German regional CPI data for December has picked up from the previous month.
• Legislation published ahead of a House of Commons debate on the the national lockdown in England indicate that current restrictions may run until the end of March.

GERMAN AUCTION RESULTS: Germany Allots E4.12bn of the new 0% Feb-31 Bund

• Average yield -0.52% (0.57%)
• Buba cover 1.64x (2.04x)
• Bid-to-cover 1.35x (1.65x)
• Total E5bn issued

FOREX SUMMARY

A busy early morning session for FX and across assets.

• USD came under renewed pressure throughout the EU morning session.
• Price action was led by some of the US run=offs results, with Warnock announced as the first winner.
• It also looks more than likely that the Dems will win the 2nd seat, as Ossoff moves ahead.
• Stimulus hope keeps the USD under renewed pressure.
• Despite some European National PMI misses this morning, EUR has taken its cue from the USD selling.
• EUR leads against JPY, but another small round of USD selling goes through.
• Still worth keeping a close eye on EUR appreciation and the ECB going forward.
• Couple of close resistance for the currency are nearing.
• EURJPY comes at 127.08 (dec 18 high)
• EURUSD 1.2353 High Apr 20, 2018
• A more limited impact for Cable, with the pair up 0.21% at 1.3652.
• Next resistance here is still at 1.3704 High Jan 4 where decent selling interest has been noted of late.
• Looking ahead, US ADP, Service PMI, Durable goods are the highlight, as well as the FOMC minutes

OPTION EXPIRIES: Expiries For Jan06

Notable one in EURUSD at 1.2300

• EURUSD: 1.2270 (297mln), 1.2300 (1.1bn)
• USDJPY: 102.75 (200mln), 103.30-35 (510mln)

TECHS: Price Signal Summary - Yields Rise

• Bunds (H1) sold off sharply overnight but has recovered off the day low of 177.02. Watch support at 177.01, Dec 23 low. A break would trigger deeper losses. 177.85, the intraday high is first resistance.
• Gilts (H1) have traded through support at 134.89, Dec 30 low. An extension lower would open 134.01, Dec 24 low.
• The Treasuries (H1) sell-off has exposed the next key support at 137.07+, Dec 4 low. From a technical standpoint, a break would open 137.00 and 136.26+, Nov 11 low.
• In the equity space, the key near-term directional triggers for the E-Mini S&P contract are: support at 3651.00, Dec 23 low and resistance at 3773.25, Monday's high, The trend remains up.
• On the commodity front, Gold remains firm and is approaching $1965.6, Nov 9 high and a key resistance. Both Brent and WTI rallied yesterday negating a bearish chart pattern from Monday and have also resumed their respective uptrends. Brent (H1) has potential for $54.26 and $55.14, the 1.236 and 1.382 projections of the Nov 13 - 26 rally from Dec 2 low. WTI (G1) targets $52.11, 1.00 projection of Apr - Aug rally from the Nov 2 low.
• In FX , the USD remains weak. EURUSD targets 1.2380, 2.00 projection of the Nov 4 - 9 rally from the Nov 11 low. USDJPY targets 102.02, Mar 10 low following this week's fresh low prints.

EQUITIES: NASDAQ Lagging With Dem Senate Control Eyed

• Asian stocks closed mixed, with Japan's NIKKEI down 102.69 pts or -0.38% at 27055.94 and the TOPIX up 4.96 pts or +0.28% at 1796.18. China's SHANGHAI closed up 22.2 pts or +0.63% at 3550.877 and the HANG SENG ended 42.44 pts higher or +0.15% at 27692.3.
• European equities are higher, with the German Dax up 119.26 pts or +0.87% at 13666.42, FTSE 100 up 144.69 pts or +2.19% at 6651.92, CAC 40 up 37.11 pts or +0.67% at 5564.73 and Euro Stoxx 50 up 32.3 pts or +0.91% at 3555.24.
• U.S. futures are mixed-to-lower, with tech underperforming (likely a reactionto potential regulation under a Democratic controlled Senate). Dow Jones miniup 44 pts or +0.15% at 30329, S&P 500 mini down 15 pts or -0.4% at 3703.5,NASDAQ mini down 260 pts or -2.03% at 12533.5.

COMMODITIES: Industrials Leading, Silver > Gold

Commodities are trading mixed, with pro-cyclical industrials leading; silveroutperforming gold amid a weaker dollar boosting metals in general.

* WTI Crude up $0.29 or +0.58% at $50.28* Natural Gas down $0.08 or -2.92% at $2.64* Gold spot up $0.75 or +0.04% at $1953.23* Copper up $5.3 or +1.46% at $369.1* Silver up $0.28 or +1.01% at $27.8246* Platinum up $1.97 or +0.18% at $1115.93

OPTION FLOW SUMMARY

• TYG1 139c, bought for 2 in 30k total
• RXG1 177.50/177.00ps vs 178.00/178.50cs, sold the ps at -13 in 5k,RXG1 180 calls, bought for 4 in 10k.
• RXH1 177.50/176.00/174.50p fly 1x3x2, bought for 3 in 1.5k
• LM1 100p, sold at 4 in 2k LM1 100.00/12/25/37c condor, bought for 3.5 in 7k LM1 100.25c x2 vs LU1 10012/100.25cs, sold the June at 1 in 6kx3k