MNI US MARKETS ANALYSIS - GBP Bouncing

US TSYS SUMMARY: Busy Auction Slate Ahead

A busy Treasury auction slate is the undoubted highlight of an otherwise quiet Monday schedule. Tsy futures are a little stronger, though well within Friday's ranges.

• Jun 10-Yr futures (TY) up 2/32 at 131-25.5 (L: 131-20 / H: 131-28.5), volumes on the light side (<250k). The 2-Yr yield is unch at 0.1549%, 5-Yr is up 0.2bps at 0.8644%, 10-Yr is down 0.2bps at 1.6569%, and 30-Yr is down 0.6bps at 2.3232%.
• The modest Tsy bid has been assisted by a soft start to the week for equity futures. Little in the way of headline flow in Asia-Pac / Europe.
• At 1130ET we get auctions of $58B 3-Yr note and $54B of 26-week bills; at 1300ET $38B of 10-Yr note and $57B of 13-week bills.
• Boston Fed Pres Rosengren speaks on the economic outlook at 1300ET. To recap, in a 60 Minutes appearance Sunday evening, Chair Powell revealed little new, staying firmly on his cautiously optimistic message.
• 1345ET sees Pres Biden and VP Harris meeting with a bipartisan Congressional group on their infra plan.
• Light on data today: monthly budget statement (for March) out at 1400ET.

EGB/GILT SUMMARY: Mixed Start

It has been a mixed start to the week with gilts trading weaker, EGBs rallying, equities broadly lower and trading uneven against the USD.

• Gilts started off on a firm footing but quickly gave up the early gains. The shorter end of the curve has underperformed with the 2s30s spread 1bp narrower on the day.
• Bunds have firmed with cash yields broadly 1bp lower.
• It is a similar story for OATs with yields 1-2bp lower and the curve touch flatter.
• BTPs have traded in line with core EGBs. Yields are 1-2bp lower across the curve.
• Eurozone retail sales data for February came in better than expected (3.0% M/M vs 1.7% survey.
• Supply this morning came from Germany (Bubills, EUR3.239bn allotted) and Ireland (Bills, EUR750mn). In addition, the EFSF placed EUR4bn of the 0% Jul-26 bond through syndication with an order book in excess of EUR18bn. Austria has announced a dual-tranche syndication to sell 4- and 50-year bonds, which we expect to take place tomorrow.

EUROPE ISSUANCE UPDATE: 

EGB SYNDICATION: Austria has released a mandate for a dual-tranche syndication to sell 4-year and 50-year issues.

• The 4-year will mature 20 April 2024.
• The 50-year will mature 20 April 2071.

EUROPE OPTIONS FLOW SUMMARY

Eurozone:
RXM1 170.00/RXK1 170.50 put diagonal bought for 22 in 2.5k (earlier)
RXM1/RXK1 170.50/169.50/168.50/167.50 put condor calendar bought for 8 in 30k (bought June)

2RZ1 100.125/100.00 put spread bought for 1.25 in 3k
3RM1 100.25/100.375/100.50 call ladder sold at 6.25 in 3k

UK:
0LM1 99.625/99.75/100.125/100.25 broken call condor sold at 9.5 in 4k
0LM1 99.875/99.75 put spread sold at 8.5 in 4k

FOREX: GBP Bouncing, USD Creeping Lower

• GBP trades well, with the currency recouping recent losses to climb to the top of the G10 leaderboard early Monday. The UK enters the second stage of the lifting of lockdown restrictions Monday, with non-essential retail and outdoor hospitality opening for the first time in months. EUR/GBP eyes the 50-dma as next support at 0.8637, but a break below would extend the reversal of last week's rally.
• Oil-tied currencies are at the bottom-end of the table, with NOK and CAD softer, but within ranges, while WTI and Brent crude futures hold below first resistance.
• The USD trades at the day's lows ahead of the NY crossover, edging lower while equities bounce off the overnight lows. The e-mini S&P is in minor negative territory, although well within range of the all time highs posted last week.
• There are no tier 1 data releases due Monday, with focus remaining on scheduled speeches from Fed's Rosengren, BoE's Tenreyro and ECB's de Cos. The beginning of earnings season remains in view, with large-cap US bank names kicking off reporting tomorrow.

FX OPTIONS: Expiries for Apr12 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1915-30(E1.45bln, E1.4bln EUR puts)
• EUR/GBP: Gbp0.8600-05(E530mln)
• USD/CAD: C$1.2600-15($600mln-USD puts)
• USD/CNY: Cny6.4925($500mln), Cny6.5500-15($500mln)

Price Signal Summary - S&P E Minis Firm Above 4000

• In the equity space:
  • S&P E-minis needle continues to point north. The contract traded higher again Friday and is approaching 4124.75, 1.382 projection of the Feb 1 - Feb 16 - Mar 4 price swing.
  • EUROSTOXX 50 is consolidating but maintains a bullish tone with the focus on 4000.00. A break would open 4047.72, 2.236 projection of the Dec 21 - Jan 8 - Jan 28 price swing.
• In the FX world, EURUSD maintains a short-term bullish tone despite pulling back from recent highs. The focus is on 1.1939, the 50-day EMA and a key resistance area. A clear break is required to suggest scope for an extension higher. The GBPUSD outlook remains bearish. Last week, the pair stalled at the former bull channel base drawn off the Nov 2 low. Resistance has been defined at 1.3919, Apr 6 high. The key support to watch and bear trigger is 1.3670, Mar 25 low. A brief test of this support this morning failed to result in a clear break. EURGBP maintains a short-term bull tone. Last week's gains resulted in the break of a key resistance zone at 0.8646, Mar 24 high and 0.8653, the 50-day EMA. This opens 0.8731, Feb 26 high. USDJPY traded lower last week as a corrective cycle extends. Support at 109.38, the 20-day EMA has been probed. A clear break would open 109.13, Mar 26 low.
• On the commodity front:
  • Gold is holding onto the bulk of recent gains. Key resistance at $1755.5, Mar 18 high has been probed. The yellow metal also needs to clear $1759.2, the 50-day EMA to suggest scope for a stronger bounce.
  • Brent (M1) key directional triggers are unchanged.
    • Resistance is at $65.39, Mar 29 high with key support at $60.33, Mar 23 low and the bear trigger.
  • WTI (K1) directional triggers are:
    • Resistance at $62.27, Mar 30 high and support at $57.25, Mar 23 low and the bear trigger
• In the FI space, key support to watch in Bunds (M1) remains 170.52, Mar 18 low. Key resistance is 172.66, Mar 25 high. The key support and bear trigger in Gilts (M1) is unchanged at 126.79, Mar 18 low. Initial firm resistance is at 128.93, Mar 25 high.

EQUITIES: Mixed Start for Stocks, US Futures Point to Lower Open

• European equities are mixed after a lower start, with UK's FTSE-100 lagging, dropping 0.3% as GBP claws back lost ground. The Italian FTSE-MIB is the strongest so far, rising 0.5% to snap a four-day losing streak.
• Across Europe, communication services and tech names are at the bottom of the pile, reversing last week's stronger performance. Utilities and real estate are the sole sectors in the green.
• In futures space, the e-mini S&P is modestly lower alongside both DJIA and NASDAQ futures, indicating a small negative open Monday.
• Focus turns to the beginning of this week's earnings season, with large cap US banks due to report including GS, JPM, BofA and others.

COMMODITIES: WTI, Brent Inches Higher, But Resistance Intact For Now

• Both WTI and Brent crude futures trade in minor positive territory thanks to a moderately softer greenback this morning, but key resistance levels remain intact for both benchmarks.
• Some support may also have followed further reports of tension between Iran and Israel over the weekend, as reports circulate of an attack on power networks linked to Iran's Natanz uranium enrichment facility. Iranian spokesman have already stated there has been no interruption to activities at the site, despite some damage sustained to certain centrifuges.
• Spot gold and silver are in minor negative territory, but trade inside recent ranges.