MNI US MARKETS ANALYSIS - SNB Become First in G10 to Ease This Cycle

US TSYS: Underpinned By SNB Cut But Resistance Caps Rally

• Cash Tsy yields sit 3-4.5bps lower, with the rally led by the belly, underpinned by a surprise 25bp cut from the SNB even if it hasn’t materially impacted near-term FOMC pricing.
• TYM4 trades within 1-2 ticks of the day’s high of 110-24+ (+ 08+), with its increase capped for now having met resistance at 110-23 (20-day EMA). A further push higher could expose 111-01+ (50-day EMA) but moving average studies are in a bear-mode position with support at the bear trigger of 109-24+ (Mar 18 low).
• Volumes are strong at 450k, with initial post-FOMC activity in Asia hours before an acceleration from typical trends with the SNB.
• Today’s docket sees initial focus on data, mainly jobless claims, preliminary PMIs and existing home sales, before some attention on 10Y TIPS supply.
• Data: Weekly jobless claims (0830ET), Philly Fed mfg index Mar (0830ET), Current account Q4 (0830ET), S&P prelim PMIs Mar (0945ET), Existing home sales Feb (1000ET), Leading index Feb (1000ET)
• Fedspeak: VC Supervision Barr (1200ET, no text) but within blackout period
• Note/bond issuance: US Tsy $16B 10Y TIPS auction reopen (1300ET)
• Bill issuance: US Tsy $85B 4W, $85B 8W bill auctions (1130ET)

STIR: Holding The Post-FOMC Focus On June Start To Cuts

• Fed Funds implied rates for near-term meetings have lifted a little off post-FOMC lows but are still concentrated towards a first cut in June.
• There is little sign of near-term spillover from the surprise 25bp SNB cut, although it perhaps weighs further out with the Dec’24 implied rate back near post-FOMC lows.
• Cumulative cuts from 5.33% effective: 3.5bp May, 20.5bp Jun, 32.5bp Jul, 53bp Sep and 85bp Dec. June priced as much as 22bp of cuts overnight.
• Note that VC for Supervision Barr speaks today to students on “A View from the Fed” but it falls within the blackout period and so shouldn’t be policy relevant.

US TSYS: OI Points To Net Long Setting Across The Curve Post-FOMC

The combination of yesterday's rally in Tsy futures and preliminary OI data points to net long setting across the curve on Wednesday as markets took the latest FOMC decision as dovish on net.

SOFR: OI Suggests Net Long Setting Dominated In SOFR Futures Post-Fed

The combination of yesterday’s rally in SOFR futures and preliminary OI data points to net long setting as the dominant positioning factor through the blues.

• A few pockets of modest net short cover interrupted the wider trend.
• The move came as the FOMC decision was perceived as dovish on net.
• Fed-rate cut premium deepened a little post-decision, with ~83bp of ’24 cuts now priced.

EUROPE ISSUANCE UPDATE: 

Spain auction results:
That was a decent auction with each Bono / Obli sold exceeding the mid-price ahead of the auction close, and solid bid-to-covers (particularly for the 2.50% May-27 Bono which saw bids over double that received in last month's auction). The total volume of E6.066bln was the middle of the E5.5-6.5bln target range.

• E2.9bln of the 2.50% May-27 Bono. Avg yield 2.896% (bid-to-cover 2.32x)
• E1.46bln of the 5.75% Jul-32 Obli. Avg yield 2.976% (bid-to-cover 1.80x)
• E1.705bln of the 3.45% Jul-43 Obli. Avg yield 3.65% (bid-to-cover 1.90x)

• E5.237bln of the 2.50% Sep-27 OAT. Avg yield 2.71% (bid-to-cover 2.40x)
• E4.642bln of the 2.75% Feb-29 OAT. Avg yield 2.64% (bid-to-cover 2.13x)
• E2.619bln of the 1.50% May-31 OAT. Avg yield 2.65% (bid-to-cover 2.68x)

• E1.099bln of the 0.10% Mar-29 OATei. Avg yield 0.46% (bid-to-cover 2.44x)
• E301mln of the 1.80% Jul-40 OATei. Avg yield 0.73% (bid-to-cover 3.84x)
• E598mln of the 0.10% Mar-36 OATi. Avg yield 0.69% (bid-to-cover 2.42x)

Ireland auction results:

• E500mln of the 2.60% Oct-34 IGB. Avg yield 2.749% (bid-to-cover 2.30x)
• E500mln of the 3.00% Oct-43 Green IGB. Avg yield 2.949% (bid-to-cover 1.52x).

CENTRAL BANK PREVIEWS

MNI BOE PREVIEW - MARCH 2024: Vote and Guidance

The March MPC meeting will be in focus this week with two key aspects: first the vote split and second the guidance. The MNI Markets team, and the majority of analysts, expect an unchanged vote, although we do note the possibility that either Haskel, and also possibly Mann, could vote for unchanged Bank Rate at this meeting. We also expect no material change to guidance. We look at risks to both of these - as well as potential changes to the guidance.

MNI CBRT PREVIEW- MARCH 2024: Hold Likely But Hawkish Surprise Possible

The Central Bank of Turkey are broadly expected to keep the one-week repo rate on hold at 45%, having communicated previously that its hiking cycle is complete, though the recent acceleration in TRY depreciation and increasing pressure on Turkish FX reserves may prompt a hawkish surprise. But given the proximity to the local elections on March 31, the central bank may decide to postpone any rate decision while it awaits more clarity on the inflation outlook.

MNI BANXICO PREVIEW - MARCH 2024: Monetary Easing Expected to Commence

Most analysts are expecting Banxico to cut the overnight rate by 25bps to 11.00%.Declining inflation, the high level of the real ex-ante policy rate and the ongoing resilience of the Mexican peso all suggest conditions have been met to ease the monetary policy stance this week. However, the cautious rhetoric from committee members and the prolonged pause from the Fed, highlight that the decision is by no means set in stone and increases the likelihood of a split decision.

MNI COLOMBIA CENTRAL BANK PREVIEW - MARCH 2024: Easing Pace Likely to be Accelerated

Analysts expect the central bank to accelerate the pace of rate cuts this week, with a majority looking for a 50bp move to 12.25% and risks skewed towards a slightly larger cut. A further decline of inflation and inflation expectations means that real rates have risen since the last meeting, which along with weak activity supports the case for a larger rate move. The continued divergence of views among the committee, however, means that the decision is unlikely to be unanimous.

FOREX: CHF Slides as SNB Become First G10 to Trigger Easing Cycle

• The Greenback is recovering off post-Fed lows, putting the USD Index comfortably above the overnight and Wednesday worst levels. This keeps the USD Index inline with longer-running trends, as the 200-dma holds just above at 103.700. The European session so far has been active, with several rate decisions and key flash PMI releases to digest.
• The Swiss National Bank took markets by surprise in cutting rates by 25bps, putting the headline deposit rate at 1.50% to become the first G10 central bank globally to ease policy in this cycle. With only 7bps of easing priced via OIS markets ahead of the release, CHF corrected lower, tipping EUR/CHF to new cycle highs and narrow the gap with the 0.9800 handle. Resultingly, the CHF is comfortably the poorest performer in DM FX.
• The Norges Bank rate decision saw rates unchanged, but the policy path projections erred hawkishly, with markets expecting a larger downward revision due to recent developments in inflation and the NOK. As a result, NOK trades firmer tipping EUR/NOK to pullback lows of 11.4846.
• PMI data has generally fared lower-than-expected, with French and German flash PMI numbers weaker than market forecast. This took some wind out of the sails of the single currency, tipping EUR/USD lower by ~20 pips headed into the NY crossover.
• The Bank of England rate decision ahead takes focus - with the Bank seen keeping rates unchanged. The MPC vote split will be of particular focus, given the risks of a three-way split among the council. Weekly US jobless claims are also due, as well as the existing home sales release for February. Fed's Barr will be the first speaker following yesterday's FOMC

FX OPTIONS: Expiries for Mar21 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0825-30(E911mln), $1.0900-20(E2.7bln), $1.0990-05(E1.9bln)
• USD/JPY: Y150.00($573mln)
• AUD/USD: $0.6500(A$1.0bln)

EQUITIES: E-Mini S&P Trading at Fresh Cycle High Following Fed

• A bullish trend condition in Eurostoxx 50 futures remains intact and today’s gains reinforce current conditions. The contract has traded above its recent high to confirm a resumption of the uptrend and this has also resulted in a break of the 5000.00 handle. Moving average studies remain in a bull-mode position, highlighting positive market sentiment. Sights are on 5074.7, a Fibonacci projection. Initial firm support is at 4884.30, the 20-day EMA.
• The trend condition in S&P E-Minis remains bullish and this week’s extension reinforces this theme. The break of 5257.25, Mar 8 high, confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. MA studies are in a bull-mode position reflecting positive market sentiment. Sights are on 5370.81, the top of a bull channel drawn from the Jan 17 low. Initial firm support is at 5185.88, the 20-day EMA.

COMMODITIES: Gold Narrows Gap to Resistance at $2230 Projection Level

• WTI futures traded higher Tuesday and a bull theme remains intact. Last week’s gains resulted in a break of $79.87, Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $83.87 next, the Oct 20 ‘23 high. A break of this level would open $84.87, the Sep 15 ‘23 high and a key resistance Support to watch is $79.08, the 20-day EMA.
• The trend condition in Gold is bullish and this week’s gains reinforce current conditions. The earlier rally today delivered another all-time high and confirms a resumption of the primary uptrend. Moving average studies remain in a bull-mode condition, reflecting positive market sentiment. This signals scope for a climb towards $2230.1, a Fibonacci projection. On the downside, key short-term trend support has been defined at $2146.2, the Mar 18 low.