MNI US MARKETS ANALYSIS - Oil Extends Bounce, WTI Nears $110

US TSYS SUMMARY: Bear Flattening Under Low Volumes

• Cash Tsys have seen a bear flattening following the delayed open with Tokyo on holiday as larger rate hikes continue to be priced in and oil prices rise. This has pushed 2s10s back close to post-pandemic flats of ~20bps.
• 2YY +4bps at 1.976%, 5YY +4.2bps at 2.185%, 10YY +2.9bps at 2.178% and 30YY +1.3bps at 2.433%.
• With an earlier high of 1.9907%, 2Y yields are close to the post-pandemic high of 1.9956% touched in the spike early in Powell’s conference.
• TYM2 sits 10+ ticks down on the day at 124-10 on very low volumes. It remains comfortably above support from last week’s FOMC-induced low of 123-25+ whilst resistance is seen at 125-14+, the Feb 10 low and a recent breakout level.
• Fedspeak: Powell (1200ET) speaks at NABE conference with text and moderated Q&A, with Bostic, 2024 voter, at the same event beforehand (0800ET).
• Bill issuance: US Tsy $57B 13W, $48B 26W bill auctions (1130ET).

Source: Bloomberg

STIR FUTURES: Fed Hikes Firm Further, Powell Ahead

• Hikes implied by Fed Funds futures have increased further following Friday’s slew of Fedspeak.
• FOMC-dated Fed Funds have 38bps for the next meeting in May, 104bps over the three meetings including July and 171bps for Dec, i.e. close to the 2.00-2.25% range by year-end.
• To recap from Fri: Bullard (2022 voter) looks for rates of 3.00-3.25% by end-2022, Waller (permanent) is looking for 225-250bp of hikes this year and Kashkari (2023) appears no longer the most dovish with 175bp of hikes in 2022. Barkin (2024) was on the relatively softer side and could be 1 of 5 dots eyeing 175bp in 2022 or even 1 of 4 below 175bps judging by patience to hit neutral.
• Both Powell and Bostic speak later with text and moderated Q&A.

EUROPE ISSUANCE UPDATE:

Slovakia sells 3/10/15/30-year SlovGBs:

• E133mln 0% Jun-24 SlovGB, Avg yield -0.0649% (Prev. -0.5690%), Bid-to-cover 1.72x (Prev. 1.55x)
• E39mln 1.00% Oct-30 SlovGB, Avg yield 0.9117% (Prev. 0.6200%), Bid-to-cover 2.76x (Prev. 1.61x)
• E129mln 0.375% Apr-36 SlovGB, Avg yield 1.6590% (Prev. 1.2924%), Bid-to-cover 1.48x (Prev. 1.18x)
• E67mln 1.00% Oct-51 SlovGB, Avg yield 1.9762% (Prev. 1.0060%), Bid-to-cover 3.26x

FOREX: Markets Pick Up Where They Left Off

• Equities and risk sentiment are mixed early Monday, but have generally picked up where they left off on late on the Friday session, with the e-mini S&P holding just below the 4450 mark and 10y Treasury yields just below 2.2%.
• This has translated to a generally stable European morning for currency markets, with the greenback mixed-to-flat, while commodity-tied currencies edge lower - in contrast with oil prices which are extending their three-day winning streak. As such, AUD and NZD are the poorest performers in G10 - but losses are marginal and markets are awaiting a pick-up in volumes and activity after the Japanese market holiday on Monday.
• The Ukrainian crisis continues to provide the market backdrop, with a Russian ultimatum delivered to the port city of Mariupol firmly rejected by Ukrainian forces - leaving focus on what the next steps of the Russian siege of the city could entail. President Biden is due to hold pre-trip discussions with European leaders in the coming days before his visit to the continent later in the week.
• The data slate is typically light for a Monday, with just the Chicago Fed National Activity Index on the docket. This should keep focus on the speaker slate, with Fed's Bostic and ECB's Nagel both due ahead of an appearance from Chair Powell at the NABE at 1600GMT/1200ET.

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

• EUR/USD: $1.1100(E2.6bln), $1.1150(E646mln)
• USD/JPY: Y116.90-05($1.1bln), Y118.00($635mln), Y118.95-00($635mln)
• USD/CAD: C$1.2740-55($1.4bln)

Price Signal Summary - S&P E-Minis Have Cleared The 50-DAY EMA

• In the equity space, S&P E-Minis traded higher last week and are holding onto recent gains. The contract has cleared the 50-day EMA that intersects at 4400.17 today. The break improves the short-term bullish condition and opens 4578.50, the Feb 9 high. A strong reversal from current levels would instead be seen as a bearish signal. Initial support is seen at 4323.83, the 20-day EMA. EUROSTOXX 50 futures traded higher last week and price remains at its recent highs. The move higher has exposed the 50-day EMA, at 3878.10 - a key short-term resistance.
• In FX, EURUSD last week, traded above key resistance at 1.1121, the Jan 28 low. A clear break of this hurdle would signal potential for a bullish extension near-term. This would open 1.1200, the 2.0% 10-dma envelope as well as the 50-day EMA just below, at 1.1193. A failure to hold onto levels around the 1.1121 handle would instead highlight a bearish threat. GBPUSD remains in a downtrend and last week’s gains are considered corrective. A resumption of weakness would open; 1.2954, the 1.764 projection of the Jan 13 - 27 - Feb 10 price swing and 1.2933, the Nov 5 2020 low. The bear trigger is 1.3000, Mar 15 low and resistance is seen at 1.3234, 20-day EMA. USDJPY remains bullish following last week’s breach of resistance at 118.60/66, the Jan 3 ‘17 and Dec 15 ‘16 highs. This has strengthened bullish conditions and sights are on 119.90, the bull channel top drawn from the Jun 1 2021 high and the 120.00 psychological handle.
• On the commodity front, Gold is off its recent lows. Short-term conditions remain bearish though following the recent pullback from $2070.4, Mar 8 high. Attention is on $1892.5 next, the 50-day EMA. The broader trend condition is bullish though and the recent pullback is considered corrective. Initial resistance to watch is at $1954.7, the Mar 15 high. Oil markets have recovered from recent lows. WTI is trading above last Tuesday's low of $93.53. The recent recovery means the 50-day EMA, at $94.32, has remained intact. Resistance is at $110.29, the Mar 11 high. A break of this level would signal scope for a stronger short-term rally.
• In the FI space, Bund futures are consolidating. The contract remains in a downtrend following last week’s break of key support at 161.50, the Feb 10 low and a medium-term bear trigger. The break opens the 160.00 handle. Gilts last week probed the key support at 121.10, Feb 16 low. A clear break would open 120.00 and confirm a resumption of the broader downtrend. Resistance is seen at 123.52, the Mar 9 high. Gains are considered corrective.

EQUITIES: US Futures Soft But Holding Most Of Friday's Gains

• In Asia, Japanese markets were closed for holidays; China / HK stocks closed mixed/lower: China's SHANGHAI closed up 2.613 pts or +0.08% at 3253.686 and the HANG SENG ended 191.06 pts lower or -0.89% at 21221.34
• European equities are fairly flat, with the German Dax up 3.23 pts or +0.02% at 14414.69, FTSE 100 up 34.33 pts or +0.46% at 7437.52, CAC 40 up 0.7 pts or +0.01% at 6617.99 and Euro Stoxx 50 up 3.15 pts or +0.08% at 3905.55.
• U.S. futures are off slightly, with the Dow Jones mini down 78 pts or -0.23% at 34555, S&P 500 mini down 3.75 pts or -0.08% at 4449.75, NASDAQ mini down 46.25 pts or -0.32% at 14367.25.

COMMODITIES: Oil Bounce Continues On Continued Supply Fears

• WTI Crude up $4.18 or +3.99% at $108.88
• Natural Gas up $0.07 or +1.52% at $4.937
• Gold spot up $1.79 or +0.09% at $1923.55
• Copper down $4.85 or -1.02% at $469.15
• Silver up $0.03 or +0.14% at $25.0019
• Platinum up $9.93 or +0.97% at $1037.5