MNI US MARKETS ANALYSIS - Oil Extends Recovery Off Lows

US TSYS SUMMARY: Edging Higher, With Rolls And Fed Speakers In Focus

Treasuries are a little stronger to begin the week, but very much within Friday's ranges with few catalysts in the overnight session.

• With much of Europe on holiday (Pentecost), trading's been light overall in the overnight session with prices rangebound. Front TYs trading on decent volume (~300k), but note that rolls are playing a big role (TYU1 ~170k traded).
• The 2-Yr yield is flat at 0.1534%, 5-Yr is down 0.5bps at 0.8164%, 10-Yr is down 0.5bps at 1.6165%, and 30-Yr is down 0.1bps at 2.3162%. Jun 10-Yr futures (TY) up 3.5/32 at 132-17.5 (L: 132-15 / H: 132-18.5)
• Some attention paid to China clamping down on commodity speculation, and Belarus/E.U. tensions, but not much that was truly market moving.
• Data consists of Chicago Fed nat'l activity index (0830ET) and FHFA house prices (0900ET).
• The Fed speaker list includes Gov Brainard (0900ET, on digital currencies at a crypto currency conference), Cleveland's Mester (1100ET, not on mon pol), Atlanta's Bostic (1200ET), and KC's George (1730ET).
• In supply, $111B of 3-/6-month bills sell at 1130ET. NY Fed buys ~$2.025B of 1-7.5Y TIPS.

EGB/GILT SUMMARY: A Mixed Start

Gilts have traded firmer this morning while EGBs have gradually weakened through the session against a backdrop of moderately higher equities and mixed trading in G10 FX.

• The gilt curve has bull flattened with the 2s30s spread.
• German bonds opened stronger but soon gave up the early gains to trade flat on the day.
• The OAT curve is marginally steeper on the back of the short-end firming.
• BTPs have traded below the Friday close with cash yields 1bp lower.
• There was no European supply this morning and no tier one data releases.
• The EU mulling the possibility of sanctions against Belarus after the "hijacking" of a Ryanair flight between Greece-Lithuania.

EUROPE OPTION FLOW SUMMARY

Eurozone:
RXN1 167.5p, sold at 9 in 5k

2RH2 100.00/25/62 broken c fly 1x2.5x1.5, bought for 1.25 in 4k

UK:
2LN1 9925/9912ps 1x1.25 vs 9962 c, bought the ps for flat in 3k

FOREX: USD Reverses Early Strength

• After a sanguine start to the session, the greenback initially bumped higher pre-NY hours, with the likes of GBP/USD and AUD/USD plumbing new session lows on relatively little newsflow. The somewhat erratic move higher in the greenback saw markets scrambling for a news driver, but the more likely catalyst is a thin market (much of Europe out for Whit Monday, although not a full bank holiday) and still fragile market sentiment. This view was confirmed as price action reversed and the USD headed lower into the US opening bell.
• Equities are rangebound, but still holding above support, but that's provided little support for AUD, and NZD, which are among the session's weakest performers. NOK trades well given the still supported oil price, with EUR/NOK rolling off last week's highs as WTI crude futures narrow the gap with $65/bbl.
• There's little on the data slate to snatch attention Monday, with the speaker schedule likely to hold more focus, as Fed's Brainard, Mester, Bostic and George as well as BoE's Bailey, Cunliffe, Haldane and Saunders all on the docket.

FX OPTIONS: Expiries for May24 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2145-60(E1.0bln-EUR puts), $1.2200(E1.1bln, E1.03bln EUR puts)
• USD/JPY: Y108.45-50($440mln-USD puts), Y108.80-109.00($665mln-USD puts)
• GBP/USD: $1.4150(Gbp298mln-GBP puts)
• AUD/USD: $0.7615-35(A$655mln), $0.7710-25(A$1.4bln-AUD puts), $0.7750(A$556mln-AUD puts)
• USD/CAD: C$1.2150($875mln-USD puts)
• USD/CNY: Cny6.5125($780mln)

Price Signal Summary - Equities Remain Above Support

• In the equity space, S&P E-minis near-term resistance has been defined at $4185.00, May 21 high. A break would open 4238.25, May 10 high. Key trend support lies at 4029.25, the May 13 low.
• In the FX space, EURUSD traded higher last week to a high of 1.2245 on May 19. A break of this level would confirm a resumption of the uptrend and open 1.2285, Jan 8 high. GBPUSD remains bullish and attention is on 1.4237, Feb 24 high and this year's high. USDJPY support remains 108.34, May 7 low. A bullish theme dominates while this support holds and attention is on 109.79, May 13 high. A break of 108.34 however would highlight a trendline break drawn off the Jan 6 low and risk a deeper pullback.
• On the commodity front, Gold remains bullish. The focus is on $1892.7, 76.4% retracement of the Jan 6 - Mar 8 sell-off. Oil bounces off recent lows. Brent (N1) is off recent lows however, the contract remains in a corrective bearish cycle. Key S/T support lies at $63.93, Apr 26 low. WTI (N1) key support lies at $60.55, Apr 22 low.
• In the FI space, Bunds (M1) traded lower last week and cleared support at 168.59, May 13 low. This confirmed a resumption of the underlying downtrend and opens 168.09, 0.764 projection of the Jan 27 - Feb 25 - Mar 25 price swing. The bear trigger is 168.29, May 19 low. Near-term risk in Gilts (M1) is still skewed to the downside. The key support and bear trigger is 126.79, Mar 18 low.

EQUITIES: Broadly Constructive Start To The Week

• Asian stocks closed mostly higher, with Japan's NIKKEI up 46.78 pts or +0.17% at 28364.61 and the TOPIX up 8.35 pts or +0.44% at 1913.04. China's SHANGHAI closed up 10.725 pts or +0.31% at 3497.282 and the HANG SENG ended 46.18 pts lower or -0.16% at 28412.26.
• European equities are slightly higher (amid a holiday for the DAX), with the FTSE 100 up 14.14 pts or +0.2% at 7031.8, CAC 40 up 2.99 pts or +0.05% at 6396.17 and Euro Stoxx 50 up 0.34 pts or +0.01% at 4031.17.
• U.S. futures are higher, with the Dow Jones mini up 128 pts or +0.37% at 34281, S&P 500 mini up 16.75 pts or +0.4% at 4168.5, NASDAQ mini up 60.75 pts or +0.45% at 13465.75.

COMMODITIES: Oil Recovering Some Of Last Week's Losses

• WTI Crude up $1.12 or +1.76% at $64.33
• Natural Gas down $0.05 or -1.79% at $2.858
• Gold spot down $3.33 or -0.18% at $1882.74
• Copper up $0.5 or +0.11% at $448.7
• Silver up $0 or +0.01% at $27.7295
• Platinum down $4.93 or -0.42% at $1171.88