MNI US MARKETS ANALYSIS - US Yields Hitting Fresh Highs Pre-FOMC

US TSY SUMMARY: 10Yr Yield Hits Fresh Highs Ahead Of Fed

• The 2-Yr yield is up 0.4bps at 0.1531%, 5-Yr is up 1.2bps at 0.8406%, 10-Yr is up 2.3bps at 1.6409%, and 30-Yr is up 1bps at 2.3887%.
• Jun 10-Yr futures (TY) down 6/32 at 131-24.5 (L: 131-24 / H: 131-31), unremarkable overnight volume for the 2nd consecutive session (~260k traded at 0630ET), though some noteworthy block flow in options in Asia-Pac, incl TYJ1 puts bought at strikes 130.00 (3.75k) and 131.00 (20k).
• Dollar and stocks off earlier session highs.
• FOMC decision out at 1400ET with Powell press conference a half hour later.
• We get some data as well: Feb Housing Starts/ Building Permits at 0830ET. Otherwise not much of note on the calendar.
• $35B bill sale at 1130ET; no NY Fed purchases due to FOMC meeting.

EGB/GILT SUMMARY - Bear Steepening Ahead of The Fed

European sovereign bonds have sold off alongside a move lower in equities and broad USD dollar strength against the G10 (modest cable gains are a notable outlier)

• The market is focused on the FOMC later today. Although a material change in monetary policy is not expected, the revised economic forecasts will be closely watched.
• Gilts have led the charge this morning, underperforming core EGBs. Yields are 2-5bp lower with the curve 3bp steeper.
• Bunds have similarly traded weaker with the long-end under more pressure. The 2s30s spread is 2bp wider on the day.
• OAT yields are broadly 1-3bp higher with the curve similarly 2bp steeper.
• BTPS have underperformed core EGBs. Yields are up 1-4bp.
• Supply this morning came from the UK (Gilt, GBP2.25bn), Germany (Bund, EUR1.222bn allotted) and Portugal (Bills, EUR1.5bn). Greece is today placing EUR2.5bn of a 30-year issue.
• The final Eurozone CPI print for February matched the flash estimate (0.2% M/M, 0.9% Y/Y).

EUROPE ISSUANCE: Auctions from UK & Germany, Syndication from Greece, Luembourg

UK DMO sells GBP2.5bln of 0.625% Jul-35 Gilt, Avg yield 1.179% (Prev. 0.969%), Bid-to-cover 2.64x (Prev. 2.55x), Tail 0.1bp (Prev. 0.5bps)

Germany allots E1.222bln of the 0% Aug-50 Bund, Avg yield 0.21% (Prev. -0.13%), Bid-to-cover 0.94x (Prev. 1.19x). Note the auction is technically uncovered. Weak auction.

Greece 30y GGB syndication:
- Guidance revised to MS+150-155bps area
- Books in excess of E17bln

Luxembourg 10y syndication:
- Spread set at MS -9bps

EUROPE OPTION FLOW SUMMARY: 

Eurozone:
RXK1 170.5/169ps, bought for 27 in 2k

OEJ1 135.00/135.50cs 1x2, sold at 17 in 1.5k

0RM1 100.37/50/62/75c condor, sold at 10.25 in 4k (ref 100.535, 21 del)

UK:
LM1 99.87/00/12/25c condor, sold at 5 in 5k (ref 99.92)
0LM1 99.62/75/12/25 c condor sold at 8.75 in 5k (ref 99.765)
2LM1 99.75/99.62p fly, sold at 2.25 in 2k

FOREX: Greenback Closer to Recent Highs Pre-Fed

• The greenback trades in minor positive territory ahead of today's Fed meeting, with the USD Index holding closer to recent highs and is narrowing the gap with 2021's best levels hit on March 9th at 92.503.
• Having traded poorly throughout European hours Tuesday, GBP/USD recovered to close flat. This recovery has extended into the Wednesday morning, with GBP firmer against most others in G10.
• AUD is weaker, but AUD/USD has steered clear of testing the week's lowest levels, with support undercutting at 0.7706/0.7711. A break below here would open 0.7689 initially ahead of the March lows of 0.7621.
• Focus turns to the upcoming Fed decision, in which markets look for any signs that the FOMC could address the recent volatility in government bond yields. US housing starts/building permits and the Canadian CPI release for February also cross.

FX OPTIONS: Expiries for Mar17 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1900(E1.65bln-EUR puts), $1.1940-50(E603mln), $1.2000(E1.2bln), $1.2040-55(E1.6bln), $1.2065-75(E671mln)
• USD/JPY: Y108.30($630mln), Y108.50-55($1.3bln)
• GBP/USD: $1.3885-90(Gbp614mln-GBP puts)
• EUR/GBP: Gbp0.8600(E1.2bln), Gbp0.8750(E621mln)
• USD/CHF: Chf0.9200($660mln)
• AUD/USD: $0.7745-50(A$540mln), $0.7765(A$550mln)
• USD/CAD: C$1.2685($793mln)
• USD/CNY: Cny6.40($884mln), Cny6.46($895mln), Cny6.57($500mln)
• USD/ZAR: Zar15.00($531mln)

Price Signal Summary - Key Support In Treasuries Remains Exposed

• In the equity space conditions are unchanged and bulls remain in charge. E-mini S&P futures are consolidating close to recent highs. The focus is on the psychological 4000 level.
• In the FX space:
  • In EURUSD 1.1990, Mar 11 high, represents the trigger for a stronger S/T recovery. Continued weakness would open 1.1836, Mar 9 low where a break confirms a resumption of this year's downtrend.
  • USDJPY remains in an uptrend. The focus is on 109.56, 61.8% of the Mar 2020 - Jan downleg and an important pivot resistance. Support is at 108.34 Mar 10 low.
    • The trend remains overbought. Price however has yet to display a reversal and signal a top.
• On the commodity front, a bullish engulfing candle in Gold on Mar 9 is still in play. It highlights a S/T base at $1676.9, Mar 8 low. The focus is on the 20-day EMA at $1745.1. For bears, a break of $1676.9 would resume the downtrend. Oil contracts remain below the Mar 8 high. The short-term directional risk appears skewed to the downside. The key directional triggers are unchanged at:
  • Brent (K1) - $71.38, Mar 8 high and $66.50, Mar 10 low.
  • WTI (J1) - $67.98, Mar 8 high and $63.13, Mar 10 low.
• In the FI space, BTPs (M1) pivot resistance is at 150.69, 76.4% of the Feb 12 - 26 sell-off. A break would strengthen a bullish argument. In Bunds (M1), the resistance to watch today is 172.20, Mar 11 high and in Gilts (M1), 129.27, Mar 2 high remains the key near-term resistance. Gilt futures traded lower Monday to confirm a resumption of the downtrend. The directional risk is still skewed to the downside. Trend conditions in Treasuries remain bearish. Key support at 131-23, Mar 5, 12 and 15 low remains exposed. A break would open 130-07, Feb 2, 2020 low.

EQUITIES: Largely flat on the day ahead of the FOMC

• Japan's NIKKEI down 6.76 pts or -0.02% at 29914.33 and the TOPIX up 2.53 pts or +0.13% at 1984.03
• China's SHANGHAI closed down 1.182 pts or -0.03% at 3445.551 and the HANG SENG ended 6.43 pts higher or +0.02% at 29034.12
• The German Dax is down 13.25 pts or -0.09% at 14545.23, FTSE 100 down 20.11 pts or -0.3% at 6784.24, CAC 40 down 3.71 pts or -0.06% at 6051.88 and Euro Stoxx 50 down 7.72 pts or -0.2% at 3842.84.
• Dow Jones mini down 3 pts or -0.01% at 32835, S&P 500 mini down 3 pts or -0.08% at 3959.5, NASDAQ mini down 24.5 pts or -0.19% at 13127.75.

COMMODITIES: Copper higher but platinum lower

• WTI Crude down $0.08 or -0.12% at $64.69
• Natural Gas down $0.01 or -0.31% at $2.553
• Gold spot up $3.25 or +0.19% at $1734.64
• Copper up $3.3 or +0.81% at $409.95
• Silver up $0.05 or +0.2% at $25.981
• Platinum down $7.09 or -0.58% at $1209.16