MNI US MARKETS ANALYSIS - Treasuries Sink Further, Alongside JPY

US TSYS: No Let Up In Post-Payrolls/ISM Cheapening

• Cash Tsys are firmly cheaper on the day as post-payrolls/ISM services momentum continues. At the front end, roughly half of the day’s move came on the open with the remainder in European hours.
• 2YY +10bps at 4.389%, 5YY +11.0bps at 3.769%, 10YY +8.4bp at 3.608% and 30YY +5.4bp at 3.668%
• TYH3 trades 20+ ticks lower at 113-25 on very strong volumes for the time of day. It has just pulled back off session lows at 113-22+ that saw it clear both a key short-term support at 114-05+ (Jan 30 low) and the 50-day EMA, opening 113-17+ (61.8% retrace of Dec 30 – Jan 19 bull leg).
• No Fedspeak scheduled with an eye on Powell’s appearance tomorrow, but potential for pop-up appearances with Daly’s (’24 voter) Friday appearance the only member since Wednesday’s FOMC announcement.
• Bill issuance: US Tsy $60B 13W, $48B 26W bill auctions (1130ET)

STIR FUTURES: Solid Further Trimming Of 2H23 Rate Cuts

• Fed Funds implied hikes have pushed higher overnight, pricing 24bp hike for March and a cumulative 41.5bp for May as two further 25bp hikes are more seriously considered.
• The terminal now sits at 5.06% in June vs 4.89-4.9 prior to payrolls or circa 5% after payrolls and then ISM services were initially digested.
• Largest changes are further out the curve with the Dec’23 effective rate now at 4.72%, from 4.4% prior to payrolls, as 2H23 cuts are trimmed to 34bps from 50bps early Friday.

FOMC-dated Fed Funds implied ratesSource: Bloomberg

US EQUITIES: Disney, Abbvie, PepsiCo, Linde Among the Earnings Highlights This Week

• Earnings season continues, but we're well into the second half of the quarterly reports now, with near 70% of the S&P 500 by market cap now having reported.
• This week, another 9.5% of the index are due, with highlights including Walt Disney Co, Abbvie, PepsiCo, Linde, Philip Morris International and S&P Global, among others.
• On average, US firms are generally beating expectations across both EPS and sales metrics, with 70.4% of firms beating EPS forecasts and 65.6% beating on sales.
• Full schedule including timings, EPS and revenue expectations here: https://roar-assets-auto.rbl.ms/files/51093/MNIUSE...

FOREX: JPY Slides as Markets Contemplate Amamiya as Next BoJ Governor

• The USD is on the front foot early Monday, with markets adding to the post-payrolls gains to put the USD Index at the best levels since early January and within range of the next key level: the 50-dma at 103.71. Clearance here would be the first since Q1 2022.
• JPY is comfortably the poorest performer following spurious reports in the Nikkei overnight that cited current BoJ deputy governor Amamiya as the name-in-the-frame to take over from Kuroda in a few months' time. Despite very swift denials from government spokespeople, markets have taken the prospect of an Amamiya adminstration as a signal of continuity for ultra-easy policy - resulting in USD/JPY testing solid resistance at 132.67.
• The greenback is second only to the CHF, which is the firmest currency in G10 - gaining alongside a pullback for global equity markets. The benchmark EuroStoxx 50 is lower by close to 1.5% at pixel time.
• Datapoints are few and far between Monday, with the central bank speaker slate similarly quiet. BoE's Pill is on the docket, but is not expected to cover anything outside of last week's monetary policy report.

FX OPTIONS: Expiries for Feb06 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0600(E623mln), $1.0875-80(E1.0bln), $1.0900(E745mln)
• USD/JPY: Y130.25-50($1.5bln), Y131.00($1.1bln)
• AUD/USD: $0.6940($1.4bln)
• USD/CAD: C$1.3350($545mln), C$1.3500($690mln)
• USD/CNY: Cny6.7500($500mln)

BONDS: Core FI Continues Its Post-Payrolls Drift Lower

• After moving lower in early Asian trading as local market participants reacted to the much stronger than expected US employment and ISM services prints on Friday, core fixed income has continued to drift lower in the European timezone as markets continue to reassess terminal rate pricing higher.
• Gilts are the underperformers, after having seen big moves following last week's MPC meeting with gilt futures now largely back to where they were immediately ahead of the meeting.
• Today's calendar is a little on the light side, but there will be continued focus on the fallout of the Chinese balloon that drifted over US soil.
• This week's major economic data is backloaded with German inflation, UK activity data and Michigan inflation expectations data all due on Thursday or Friday.
• TY1 futures are down -0-15 today at 113-30+ with 10y UST yields up 6.2bp at 3.588% and 2y yields up 8.3bp at 4.374%.
• Bund futures are down -0.77 today at 137.28 with 10y Bund yields up 6.5bp at 2.254% and Schatz yields up 5.0bp at 2.588%.
• Gilt futures are down -0.91 today at 106.12 with 10y yields up 11.0bp at 3.162% and 2y yields up 14.7bp at 3.347%.

EQUITIES: E-Mini S&P Price Action Confirms Resumption of Bull Cycle, Despite Latest Pullback

• The EUROSTOXX 50 futures trend needle continues to point north. Resistance at 4206.00, the Jan 18 high, has been breached. The clear break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. A break of 4097.00, the Jan 19 low, would signal the start of a short-term bear cycle.
• S&P E-Minis traded higher last week and in the process cleared recent highs to confirm a resumption of the current bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, the Dec 13 high, has been pierced. A clear break of this level would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support lies at 4007.50, the Jan 31 low. The latest pullback is considered corrective.

COMMODITIES: Sharp Friday Sell-Off Reinforces Bearish WTI Future Conditions

• A sharp sell-off on Friday in WTI futures has reinforced current bearish conditions. The move lower has exposed $72.74, Jan 5 low and the next key support. A break of this level would strengthen the current bearish theme and expose $70.56, the Dec 9 low and a bear trigger. Moving average studies are in a bear-mode position and this highlights current market sentiment. Initial firm resistance is seen at $78.56, the 50-day EMA.
• Trend conditions in Gold are bearish for now, as the yellow metal enters a corrective cycle. This follows a strong sell-off on Thursday and Friday and sights are on the 50-day EMA, at $1853.1. This average represents a key support and if breached, would strengthen a bearish chase and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, has been defined at $1959.7, the Feb 2 high.