MNI US MARKETS ANALYSIS: Turkey Spillover Contained, Powell to Speak

US TSYS SUMMARY: Busy Start To Busy Week For Fed Speakers

Treasuries have enjoyed gains in orderly Asia-Pac/European sessions to start the week, with Fed speakers set to highlight the day's (and indeed the week's) schedule.

• Risk appetite moderated on European COVID/vaccine concerns and a Turkish market meltdown triggered by Pres Erdogan firing the central bank governor. US stock futures off lows though.
• The 2-Yr yield is down 1bps at 0.1391%, 5-Yr is down 4.2bps at 0.8383%, 10-Yr is down 4.6bps at 1.6751%, and 30-Yr is down 4.8bps at 2.385%. Jun 10-Yr futures (TY) up 13/32 at 131-20 (L: 131-07 / H: 131-24); modestly elevated volumes (~400k).
• Fed Chair Powell appears at an event hosted by the BiS at 0900ET, which may not have much on current monpol as it's on "How Can Central Banks Innovate in the Digital Age?" (Q&A but no text). His Congressional testimony Tues and Weds likely to have more impact.
• Richmond Pres Barkin speaks at 1030ET - he said over the weekend that he is hopeful the US economy is "on the brink" of a full recovery. SF's Daly speaks at 1300ET (subject: the "future of education"); VC Quarles on LIBOR transition at 1330ET, and after hours at 1915ET, Gov Bowman on the economic outlook.
• A light data slate: Chicago Fed Nat'l Activity index at 0830ET, existing home sales 1000ET.
• In supply, $111B of 13-/26-week bill auctions at 1130ET; NY Fed buys ~$3.625B of 7-20Y Tsys.

EGB/GILT SUMMARY: Vaccine Conflict

The continued fallout from access to Covid vaccines is the focus this morning after the EU ramped up rhetoric of export bans over the weekend. The shock replacement of the Turkish central bank governor on Saturday, at a time when EM risk is being reassessed amid rising G10 yields, has further fuelled safe haven demand.

• Gilts have traded firmer and the curve has bull flattened. Cash yields are up to 2bp lower on teh day with the curve 2bp flatter.
• The long-end of the bund curve has similarly outperformed the broader rally. The 2s30s spread is 2bp narrower.
• BTPs rallied sharply early in the session but subsequently gave back the gains to trade close to unch on the day. Last yields: 2-year -0.3962%, 5-year 0.0036%, 10-year 0.6631%, 30-year 1.65675.
• Supply this morning came from Germany (Bubills, EUR3.426bn allotted). The UK DMO announced that the UK's second sovereign Sukuk will be issued in the coming weeks.

EUROPE ISSUANCE: Belgian Auction

Belgium's BDA sells E3.0bln of OLOs vs E2.5-3.0bln target:
- E0.627bln 1.00% Jun-26 OLO Avg yield -0.538%, Bid-to-cover 3.29x
- E1.485bln 0% Oct-31 OLO Avg yield -0.013%, Bid-to-cover 1.90x
- E0.890bln 0.40% Jun-40 OLO Avg yield 0.495%, Bid-to-cover 1.64x

EUROPE OPTIONS FLOW SUMMARY

Eurozone:
RXK1 173/174/175c fly, bought for 11.5 in 2k
RXK1 172.50c, bought for 51/52 in 2k
RXK1 173.00c, bought for 35/36 in 2k

OEJ1 135.00/134.75ps, bought for 2 in 3k
OEJ1 135.25/50/75c fly, sold at 6.25 in 2k

UK:
0LZ1 99.50/99.62/99.75c ladder, bought the 1 for -1 in 2k
0LZ1 99.62/99.75/99.87c ladder, bought for 1.25 in 3
0LM1 with 0LU1 99.62/99.75/99.87c fly 1x3x2, strip, bought for -1 in 3k (ref) 99.745)

US:
TYJ1 131/130.5ps, bought for 4 in ~7k

FOREX: Abrupt TRY Vol Prompts Modest Risk-Off in G10

• Price action in G10 as been relatively contained so far Monday, with most major pairs trading inside the Friday range. This isn't the case in emerging markets, however, with market focus switching to Turkey after the abrupt slide in TRY after the Turkish President took markets by surprise in removing the head of the central bank just days after a 200bps rate hike.
• This prompted a slide of as much as 15% in TRY against the USD at the open. This weakness has moderated slightly, but USD/TRY remains higher by well over 6% at the NY crossover.
• This volatility has prompted some risk aversion in G10, with JPY and USD outperforming at the expense of AUD, NOK and SEK.
• Focus turns to the ECB's weekly PEPP release, in which markets watch for any increase in bond holdings as part of the bank's asset purchase programme. The release is due at 1445GMT/1045ET.
• Chicago Fed National Activity Index and existing home sales data cross, as well as speeches from Fed's Powell, Daly, Quarles & Bowman and ECB's Weidmann, Schnabel & de Cos.

Expiries for Mar22 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1840-50(E1.0bln), $1.1875-85(E660mln-EUR puts), $1.1990-1.2010(E1.1bln-EUR puts)
• USD/JPY: Y107.36-40($667mln), Y107.95-108.02($1.1bln), Y108.56-65($567mln), Y108.75($1.1bln-USD puts), Y109.05($605mln), Y109.15-20($716mln)
• EUR/GBP: Gbp0.8500(E420mln), Gbp0.8525(E650mln)USD/CHF: Chf0.9250($535mln)
• EUR/CHF: Chf1.1000-05(E430mln)
• NZD/USD: $0.7080(N$1.2bln-NZD puts), $0.7400(N$1.0bln-NZD puts)
• USD/CAD: C$1.2600($989mln-USD put)
• USD/CNY: Cny6.50($774mln-USD puts), Cny6.5650($800mln-USD puts)
• USD/MXN: Mxn21.00($547mln)

TECHS: Price Signal Summary - Key EURUSD Directional Triggers Defined

• In the equity space, E-mini S&P remain vulnerable following last week's selling pressure from 3978.50, Mar 18 high. The support to watch today is 3875.00, Friday's low. A break would confirm a breach of the 20-day EMA and reinforce short-term bearish conditions.
• In the FX space:
  • The key directional trigger in EURUSD this week are:
    • Key support at 1.1836, Mar 9 low
    • Resistance and the bull trigger at 1.1990, Mar 11 high
  • USDJPY remains in an uptrend. Attention is on 109.56, 76.4% of the Mar 2020 - Jan downleg and an important pivot resistance. Support lies at 108.34 Mar 10 low.
• On the commodity front, a bullish theme in Gold remains in place following the recovery that started Mar 8. The focus is on $1783.2, the 50-day EMA. Support is at $1719.3, Mar 18 low. Oil contracts are likely to remain under pressure and gains are considered corrective. The bear trigger in Brent (K1) is $61.45, Mar 18 low. In WTI (K1), the bear trigger is $58.28, also the Mar 18 low.
• In the FI space:
  • The key directional triggers in Bunds (M1) this week are:
    • 170.52, Mar 18 low
    • 172.20, Mar 11 high
  • Gilts (M1) registered fresh trend lows last week confirming a resumption of the downtrend. The focus is on 126.55, Apr 17, 2019 low (cont). The bear trigger is 126.79, Mar 18 low while resistance is 128.33, Mar 16 high.
  • Treasuries remain in a downtrend. The focus is on 131-00 and 130-07, Feb 2 2020 low and a key support.

EQUITIES: European Stocks Steady After Early Drop

• Asian stocks closed mixed, with Japan's NIKKEI down 617.9 pts or -2.07% at 29174.15 and the TOPIX down 22.03 pts or -1.09% at 1990.18. China's SHANGHAI closed up 38.776 pts or +1.14% at 3443.439 and the HANG SENG ended 105.6 pts lower or -0.36% at 28885.34.
• European equities are flat/down, with the German Dax up 10.59 pts or +0.07% at 14621, FTSE 100 down 19.13 pts or -0.29% at 6708.71, CAC 40 down 35.82 pts or -0.6% at 5997.96 and Euro Stoxx 50 down 5.78 pts or -0.15% at 3814.62.
• U.S. futures are mixed, with the Dow Jones mini down 89 pts or -0.27% at 32414, S&P 500 mini down 2.5 pts or -0.06% at 3897.25, NASDAQ mini up 61 pts or +0.47% at 12905.5.

COMMODITIES: Silver Underperforms With Dollar On Front Foot

• WTI Crude down $0.56 or -0.91% at $60.39
• Natural Gas down $0.02 or -0.87% at $2.509
• Gold spot down $15.15 or -0.87% at $1729.59
• Copper down $0.9 or -0.22% at $408.9
• Silver down $0.75 or -2.87% at $25.5376
• Platinum down $27.56 or -2.3% at $1170.55