MNI US MARKETS ANALYSIS - NATO Summit, Fedspeak Take Focus

US TSYS SUMMARY: Resumption Of Recent Sell-Off

• Cash Tsys have resumed a sell-off after yesterday’s rally, with the move gathering pace of late on a softer patch in equities and the dollar as Tsys modestly underperform core EU sovereigns despite high price prints in European PMIs.
• Yields remain off highs from earlier in the week for now, with 2YY +5.9bps at 2.155%, 5YY +8.4bps at 2.402%, 10YY +8.7bps at 2.379% and 30YY +7.8bps at 2.563%.
• TYM2 is 16 ticks lower on the day at 122-20+ on average volumes but remains within yesterday’s wide range. Support is seen at yesterday’s low of 122-12 whilst resistance is eyed at 123-25+ (Mar 16 low and recent breakout level).
• Fedspeak: Kashkari, Waller, Evans, Bostic and Daly overnight but only Evans (2023 voter) at 0950ET hasn’t already spoken since the FOMC decision.
• Data: Today’s highlights are likely durable goods for Feb and the preliminary PMI for March.
• Bill issuance: US Tsy $35B 4W, $30B 8W bill auctions (1130ET)
• Bond issuance: US Tsy $14B 10Y TIPS re-open (1300ET)

STIR FUTURES: Five Fed Speakers Ahead

• Hike expectations sit at the higher end of the range established since Powell’s shift to moving “expeditiously” towards tighter policy, especially over more immediate meetings.
• FOMC-dated Fed Funds have 43.5bps for the May meeting, 83.5bps for June (66% chance of 100bps over two meetings) and 189bps for December.
• Stacked Fedspeak with Kashkari, Waller, Evans, Bostic and then Daly overnight although Evans (2023 voter) at 0950ET is the only one who hasn’t already spoken since the FOMC decision.
• Waller (permanent voter) might specify where he sits on the dot plot – he wants end-2022 rates slightly above the 2.00-2.25% he sees as neutral so is either 1 of 3 looking for 2.25-2.5% or the sole one looking for 2.5-2.75%.

Cumulative hikes from FOMC-dated Fed FundsSource: Bloomberg

NORGES BANK: New Rate Path Puts Terminal Rate at 2.31% (End-2025)

• Policy rate will most likely be raised further in June
• Rate path gets the expected boost, with year-end average depo rate raised to 1.32% from 1.11% in Dec. This prices year-end rates at 1.50%
• Terminal rate(now end-2025) up to 2.31%, and path projects 4 rates hikes this year (inline with exp) and a further 4 hikes in 2023 (Q4 2023 path projection upped to 2.35% from 1.62% prior).
• Broadly inline with expectations for the rate path, and leaves Norges Bank set to raise rates at each quarterly monpol report meeting. Leaves very little suggestion of either back-to-back rate rises or a 50bps moves.
• Most notable upgrades seen across Q1 2024, with 80bps added to the rate path projections. Rates peaks at 2.52% in Q3 2024 before edging lower to new terminal rate at 2.31%.

SNB: Policy Decision As Expected, Bank Retain Currency Language

SNB policy decision inline with expectations, with the bank keeping headline rates unchanged, pushing their inflation forecasts higher (and GDP projections lower) while retaining their language and view on the CHF.

Statement highlights:

• The Swiss franc remains highly valued
• Inflation forecast upgraded as expected
• The upward revision is less pronounced over the longer term. The new forecast stands at 2.1% for 2022, and 0.9% for 2023 and 2024
• Reiterates prepared to intervene as expected

EUROPE OPTION FLOW SUMMARY

US:
TYJ2 122/121.5ps, bought for '02 in 1k

Eurozone:
SX5E 14th April 3775p, bought for 64.10 in 11.1k vs 3792 VGM2
SX7E 14th April 75p, sold at 0.45 in 6k.

FOREX: Wall Street Pullback Does Little to Deter New USD/JPY Highs

• The greenback is mixed-to-higher in early Thursday trade, reflecting the more modest performance for European equities after the pullback on Wall Street into yesterday's close. The price action has done little to deter USD/JPY bulls, however, which continue to press the rate to new cycle highs, with 121.75 printed at the European open.
• European PMI data came in generally better-than-forecast, with the details of most releases continuing to outline price and cost pressures for purchasing managers. The EUR saw some support on stronger German release, but the impact faded through the morning.
• Both the Norwegian and Swiss central banks held relatively uneventful rate decisions, with the Norges Bank raising rates by 25bps and the SNB keeping rates unchanged - both alongside expectations. Nonetheless, both banks acknowledged the risks surrounding higher inflation in the near-term.
• NOK markets watched the release of the new rate path projections from the Bank, with the terminal rate (now end-2025) at 2.31%, the path projects 4 rates hikes this year (inline with exp) and a further 4 hikes in 2023 (Q4 2023 path projection upped to 2.35% from 1.62% prior. This was broadly inline with expectations, and leaves Norges Bank set to raise rates at each quarterly monpol report meeting.
• Focus turns to today's NATO summit, with a press conference due just ahead of the US cash equity open. Participants are set to discuss the Ukraine conflict, further sanctions pressure on Russia, and what possible red lines could be drawn against Russian activity in the country. Data highlights include weekly jobless claims and preliminary February durable goods. Fedspeak includes Kashkari, Waller, Bostic and Evans, but Evans should take the broader focus - he's the only FOMC member speaking today that hasn't already commented on policy.

FX OPTIONS: Expiries for Mar24 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0950-70(E1.1bln), $1.1000-20(E615mln), $1.1065-70(E544mln), $1.1100(E1.2bln)
• GBP/USD: $1.3150-60(Gbp1.3bln)
• USD/CAD: C$1.2650($1.1bln), C$1.2800($2.1bln)

Price Signal Summary - JPY Remains Under Pressure

• In the equity space, S&P E-Minis remain in a short-term uptrend despite yesterday’s pullback. The contract is holding above the 50-day EMA that intersects at 4407.84 today - the recent break of this EMA improved bullish conditions. Scope is seen for a climb towards 4578.50, the Feb 9 high. Initial support is still seen at the 20-day EMA, at 4361.23. EUROSTOXX 50 futures failed to hang on to yesterday’s gains and moved back into its recent range. A bullish theme remains in place though and attention is on the 50-day EMA at 3869.80. This average represents an important resistance and if cleared, would further strengthen a bullish short-term theme.
• In FX, EURUSD resistance at 1.1137, Mar 17 high, remains intact. Trend signals continue to highlight a downtrend and the recent pullback signals a possible resumption of the bear cycle. The focus is on 1.0890, the Mar 9 low and 1.0806, Mar 7 low and the bear trigger. GBPUSD traded higher yesterday and through the 20-day EMA, but failed to hold on to the highs of the day. The move lower means key resistance at 1.3343, the 50-day EMA, remains intact. Watch support at 1.3120, Tuesday’s low. A break would be bearish. USDJPY continues to climb and is approaching the 122.00 handle. Clearance of 122.00 would open 122.47, the 2.382 projection of the Dec 3 - Jan 4 - 24 price swing.
• On the commodity front, Gold continues to consolidate. Short-term conditions remain bearish and attention is on $1897.2, the 50-day EMA. A break would signal scope for an extension lower. Initial resistance to watch is $1954.7, the Mar 15 high. Oil markets remain bullish. WTI sights are on $118.34, 76.4% of the Mar 7 - 15 downleg.
• In the FI space, the uptrend in yields remains intact. Bund futures have cleared the 160.00 handle this week, confirming a resumption of the downtrend. The focus is on 158.84 next, the Oct 22 2018 low (cont). Gilts have this week breached key support at 121.10, Feb 16 low. This opens 120.00 next and confirms a resumption of the broader downtrend.

EQUITIES: Energy Stocks Lead Early European Gains

• Asian markets closed mixed: Japan's NIKKEI closed up 70.23 pts or +0.25% at 28110.39 and the TOPIX ended 2.86 pts higher or +0.14% at 1981.56. China's SHANGHAI closed down 20.768 pts or -0.63% at 3250.264 and the HANG SENG ended 208.13 pts lower or -0.94% at 21945.95
• European equities are a little higher, with the German Dax up 44.58 pts or +0.31% at 14336.4, FTSE 100 up 21.61 pts or +0.29% at 7479.46, CAC 40 up 36.12 pts or +0.55% at 6610.45 and Euro Stoxx 50 up 11.59 pts or +0.3% at 3882.21.
• U.S. futures are gaining, with the Dow Jones mini up 160 pts or +0.47% at 34410, S&P 500 mini up 28.25 pts or +0.64% at 4475.75, NASDAQ mini up 113.5 pts or +0.79% at 14560.5.

COMMODITIES: Oil Edges Higher, Metals Mixed

• WTI Crude up $0.65 or +0.57% at $115.61
• Natural Gas down $0.02 or -0.32% at $5.213
• Gold spot down $4.99 or -0.26% at $1939.78
• Copper up $1.8 or +0.38% at $479.3
• Silver down $0.08 or -0.34% at $25.029
• Platinum down $8.22 or -0.8% at $1016.32