MNI US MARKETS ANALYSIS - Stacked Central Bank Week

US TSYS: Mildly Twist Steeper On Lighter Volumes

• Cash Tsys trade twist steeper, with yields ranging from 1.5bps lower (2s) to 1.5bp cheaper (30s). Despite the steepening, 2s10s at -40.5bps remains within Friday’s range.
• The front end and belly saw a brief push to new recent highs and 10Y yields equaled Friday’s 3.182 (still within YTD highs of 4.3486%) early on, before a BoJ bond buying announcement countered weakness.
• TYM4 trades near unchanged at 110-02 (- 00+) on light volumes of 215k. It briefly poked half a tick below Friday’s 109-31 low and still eyes a key support at the bear trigger of 109-25+ (Feb 23 low).
• The next two sessions are thin on macro drivers, limited primarily to housing data, whilst coupon issuance starts tomorrow with a 20Y re-open. Potential spillover from the BoJ decision aside, the FOMC decision on Wednesday is firmly on focus.
• Data: NY Fed services Mar (0830ET), NAHB housing market index Mar (1000ET)
• Bill issuance: US Tsy to sell $76B 13-W, $70B 26-W bills (1130ET)

FT Survey Sees Less Than Three 2024 Cuts, Trump Fed Chair Shortlist

• Fed Funds implied rates have cooled slightly to edge lower from Friday’s close, but still hold onto 74bp of cuts for 2024 heading with Wednesday’s FOMC in mind.
• Cumulative cuts from 5.33% effective: 0.5bp Mar, 2.5bp May, 16bp Jun, 26.5bp Jul and 74bp Dec.
• The weekend saw an FT-Chicago Booth poll of academic economists eye two or fewer cuts this year, starting between July and September, concerning struggles with the “last mile” to the inflation target.
• The WSJ meanwhile reports that influential economic advisers to Trump have shortlisted three potential candidates for Fed chair: Kevin Warsh, Keven Hassett and one of Trump’s advisers themselves, Arthur Laffer. Powell’s term as chair expires in 2026.

TSYS: OI Points To Mixed Positioning Swings On Friday

Preliminary OI and Friday's twist flattening of the curve points to mixed positioning swings ahead of the weekend.

• We saw a mix of apparentnet long cover (TU through TY futures), modest net short setting (UXY futures) and net short cover (WN futures).
• It is hard to be certain when it comes to US positioning movement given unchanged price status on the day.

SOFR: OI Points To Net Short Setting & Long Cover In SOFR Futures As '24 Cut Pricing Moved Sub-75bp

Friday's move lower in most SOFR futures and preliminary OI data points to net short setting as the dominant positioning theme in the whites, reds and blues, while net long cover seemed to dominate in the greens.

• SFRM4 saw the largest net positioning swing, with over 100K lots of fresh net shorts seemingly set.
• Fed rate cut premium continued to ease on Friday, with less than 75bp of cuts being priced through '24 (Fed Dec '23 SEP pointed to 75bp of cuts, set to be updated alongside Wednesday's monetary policy decision, see our preview for more on that matter).
• Hawkish ideas dominated over the weekend via the higher for longer argument in the FT's latest survey, while talk of Trump appointing a hawkish Fed Chair if he wins the election was also noted.

UK: Expectations for FQ1 ahead of today's investor / GEMM meetings

The DMO will hold its quarterly consultation meetings with investors (15:30) and GEMMs (17:00) today in which it will discuss more details regarding FQ1 (Apr-Jun) issuance. We set out our expectations below:

Short auctions (5 auctions)

• 3.75% Mar-27 gilt: We pencil in 2-3 reopenings (the DMO notes at least one reopening)
• 5-year gilt: The DMO also notes that it anticipates launching and reopening "at least once" a new 5-year (we had expected this but also expected 1-2 reopenings othe 4.50% Jun-28 gilt - we may still get one but two looks unlikely).

• 4.00% Oct-31 gilt: We look for 1-2 reopenings (DMO notes "at least one")
• 0.875% Jul-33 green gilt: 1 auction during FQ1 (in line with DMO expectations).
• 4.625% Jan-34 gilt: We look for 2-3 reopenings (DMO looks for "at least one")
• 3.75% Jan-38 gilt: We expect one reopening in line with the DMO's "at least one" guidance.

• DMO notes this is scheduled for June, we pencil in the W/C 10 June.
• We think that the most likely maturity would be a new Jan-37 gilt and we look for a GBP8.5-10.0bln transaction.

• 4.75% Oct-43: We look for 1-2 auctions (DMO notes likely reopenings).
• 1.50% Jul-53 green gilt: We look for 1 auction after the DMO's agenda guidance.
• 4.375% Jul-54 gilt / 4.00% Oct-63 gilt: The popularity of syndication choices will influence what is sold at auction. We have yet to see the 4.00% Oct-63 gilt reopened outside of a syndication.

• DMO notes to be held in second half of April, we pencil in W/C 22 April. The DMO has noted no guidance over the maturity yet, and noted that the syndication could be either a tap or a launch.
• In terms of potential new issues the 25/35-year areas of the curve would be the most obvious choices (2048/2058/2059 maturities most likely). If there is a reopening we think the 40-year 4.00% Oct-63 gilt is most likely (which would mean the 30-year 4.375% Jul-54 gilt could be reopened at auction - but we don't rule out a second syndication here). We see an outside chance of the 50-year 1.125% Oct-73 gilt.

• 0.75% Nov-33 linker: We expect 2-3 auctions in the quarter (the DMO notes at least two)
• 0.125% Mar-39 linker: We expect 1-2 auctions in the quarter.
• 0.625% Mar-45 linker: We pencil in one reopening in the quarter but note this linker has not yet been sold at auction. It was sold via syndication twice in 2023/24 (including launch).
• 1.25% May-54 linker: Although we wouldn’t completely rule it out, we think that it might be too early to reopen the 1.25% May-54 linker via auction.

CFTC: JPY Net Short Trimmed Further as Markets Prep for BoJ NIRP Exit

• Markets continue to trim net JPY shorts ahead of the March BoJ decision, with specs adding a net 16.5k contracts in the week-ending March 12th to lift the overall position off the shortest since 2017. This trims the net short to 31.4% of open interest, from 37.8% previously.
• The NZD position faded further off the longest in a year to put the market closer to neutral. This marked the largest weekly swing in positioning, down to a net long of 4.7% of open interest from 14.4% - a swing of 9.7%.
• Of the currencies surveyed, the positioning Z-score remains the highest for GBP at +1.24, while the EUR is the lowest, at -1.41.
• Elsewhere, markets trimmed the net short in CHF and net long MXN, while building the net short in AUD and CAD.

Full update here:

FOREX: Currencies Tread Water, An Eye on CBs

• Markets are treading water ahead of a particularly busy week of global central bank rate decisions, as the BoJ, RBA, BoE, Fed, Norges Bank and SNB are all set to make rate announcements by the end of the week. As a result, recent market ranges are being respected and there are few fresh technical signals to trigger conviction in either direction.
• On the day, the JPY is marginally weaker as the USD/JPY bounce off lows persists. This puts prices just shy of the Y149.50 level and extends the bounce off lows to 300 pips.
• NOK is modestly outperforming all others, building on the back of positive crude oil prices and a generally stronger European equity market. USD/NOK has slipped off last week's highs as a result, with the 50-dma below marking the first area of interest at 10.5037.
• Focus for the session ahead turns to the final Eurozone CPI reading for February, and the NAHB Housing Index for March from the US. The Fed remain inside their pre-meeting media blackout period, leaving the central bank speaker slate muted. ECB's Centeno is set to appear at an awards ceremony, but policy-relevant comments are likely to be minimal.

JPY Options Front-Loaded to Avoid Post-BoJ Expiry

• EUR/USD: $1.0875(E505mln), $1.0900(E3.2bln), $1.1000(E3.0bln), $1.1015(E823mln)
• USD/JPY: Y147.35-50($2.4bln), Y148.00($634mln), Y148.30-50($1.2bln), Y149.00($965mln), Y149.50-55($750mln), Y149.70-75($600mln), Y150.00-20($986mln)
• EUR/GBP: Gbp0.8550(E502mln)
• AUD/USD: $0.6425(A$515mln), $0.6500(A$600mln)
• USD/CNY: Cny7.2000($1.1bln)

EQUITIES: E-Mini S&P Conditions Unchanged and Bullish, Corrections Lower Shallow

• A bullish theme in Eurostoxx 50 futures remains intact and the contract traded to a fresh cycle high last week. Moving average studies are in a bull-mode position and this continues to highlight positive market sentiment. Price is approaching the psychological 5000.00 handle. A break of this level would strengthen the bullish condition. On the downside, initial firm support lies at 4859.40, the 20-day EMA.
• The trend condition in S&P E-Minis is unchanged and remains bullish. Recent fresh cycle highs reinforce current conditions. Note too that price action continues to highlight the fact that corrections remain shallow. This is an important bullish signal, reflecting positive market sentiment. Support to watch is 5163.37 the 20-day EMA. A clear break of this average would open 5051.40, the 50-day EMA. Sights are on 5300.00 next.

COMMODITIES: WTI Futures Pierce Above Last Week's Multi-Month Highs

• WTI futures traded higher last week and this resulted in a break of resistance at $80.85, the 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 $81.70 next, a Fibonacci retracement point. A break of this level would open $84.66, the Oct 20 ‘23 high. On the downside, support to watch is $77.07, the 50-day EMA.
• The trend condition in Gold remains bullish and the latest pullback is considered corrective. The yellow metal recently cleared $2135.4, the Dec 4 high, to deliver a fresh all-time cycle high. The break reinforces bullish conditions and signals scope for $2206.6 next, a Fibonacci projection. Short-term conditions are overbought, a deeper retracement would allow this set-up to unwind. Firm support is at $2112.9, the 20-day EMA.