MNI US MARKETS ANALYSIS - More cycle highs for yields

US TSYS: Treasury Sell Off Gathers Pace

• Cash Treasuries have sold off a further ~7bps across most of the curve with only the very long end outperforming despite relatively little change in Fed hiking expectations. Tsys slightly lag the sell-offs in Bunds, Gilts on the day.
• The largely level shift in the curve sees 2s10s remains in the 15-20bps range of the past few days, having been -10bps at the start of last week as QT plans helps boost longer-term yields. The 10YY earlier touched the highest since Jan-2019.
• 2YY +7.2bps at 2.584%, 5YY +7.4bps at 2.827%, 10YY +7.4bps at 2.774%, 30YY +5.8bps at 2.775%.
• TYM2 sits 15+ ticks lower at 119-20+ having again touched a new cycle low of 119-17 earlier on average volumes. The break lower confirms a resumption of the primary downtrend and maintains the bearish price sequence of lower lows and lower highs. Beyond the intraday low, next support is eyed at 119-04+ (low Dec 3 2018 cont) whilst resistance is 121-06+ (Apr 7 high).
• Fedspeak: Bostic, Bowman opening remarks, Waller closing remarks at event starting 0930ET, Evans on mon pol at 1240ET plus an addition in NY Fed’s Williams at 1200ET.
• Bill issuance: US Tsy $57B 13W, $48B 26W bill auctions (1130ET)
• Bond issuance: YS Tsy $46B 3Y note auction (1300ET)

EGBs-GILTS: New multi year high in Yields

• Bund 10yr Yield trade at another multi year high, above 0.78%, but short of the net psychological resistance at 0.80%.
• The latter would equate to 155.29 today.
• Italian 10yr yield has cleared 2.40% in 10yr Yield, albeit off the high at the time of typing.
• Peripherals are all tighter, with Greece leading by a decent 12.2bps, Italy is 6.2bps tighter.
• Gilt remains under pressure and through new intraday lows, pushing the 10yr Yield to the highest level since 15/01/16, through 1.80%.
• Next support comes at 118.93 Low Apr 26 2016 (cont).
• Looking ahead, there are no tier 1 data left for the session.
• But attention turns to UK and US inflation data, as well as the ECB this week.

STIR FUTURES: Fed Hike Expectations Grind Higher For 2022

• Fed Funds pricing for upcoming meetings remains largely unchanged from Friday’s highs, with 47bps for May and 94-95bps for June.
• Pricing for 2H2022 has firmed a touch more, with 224bps to year-end off new highs overnight of 226bps.
• The next test is likely CPI for March tomorrow.
• Four Fed speakers today, including Governors Bowman and Waller, but three are set to just give brief opening/closing remarks at a Fed listens event.
• Evans (2023 voter) discusses the economy/mon pol at 1240ET but his views are well known. He reiterated on Thursday that he sees 7 hikes in 2022, doesn’t have a 50bp hike in his forecast but will “see how it plays out”, and wants rates towards neutral (2.25-2.5%) by end 2022 or early 2023.

FOMC-dated Fed Funds futures implied cumulative hikes (bps)Source: Bloomberg

European issuance: 6/12-month bubill auction results

OPTION FLOW SUMMARY

RXK2 160.50/161.50cs, bought for 3 in 7k

DUK2 111/110.90ps, sold at 9 in 5kDUM2 111.10/111.30cs, sold at 2 and 2.5 in 6k

Net Dollar Specs Tick Lower Despite USD Appreciation

• Net long specs on the US Dollar ticked lower in the week ended April 5 despite the USD spike, decreasing by 33.8K to a total of 102.7K contracts.
  • Speculative positions against the Yen have reached their highest level since November 2011 (+103.8K) as investors have become increasingly bearish on JPY amid monetary policy divergence.
• The global risk off environment triggered by the renewed geopolitical tensions has been supporting ‘safe-haven’ assets such as the US Dollar and Gold.
• The DXY index broke above the 99.7390 level last week (76.4% Fibo retracement of the 89.21 – 102.98 range) and found a local high at 100.1890 on Friday before consolidating lower.
• Next ST resistance to watch on the topside stands at 100.5560 (May 14 2020 high).
• On the downside, first support to watch stands at 99.40, followed by 99.
• Key support remains at 97.7270, (61.8% Fibo), which was rejected several times last month.

Source: Bloomberg/MNI

Price Signal Summary - FI Futures Resume Their Downtrend

• In the equity space, S&P E-Minis traded lower last week. The contract is testing a key area of support at the 50-day EMA. This average intersects at 4456.43 and marks a key pivot level. A clear break would strengthen a bearish case and allow for a deeper pullback that would open 4425.96 initially, 38.2% retracement of the Feb 24 - Mar 29 rally. Resistance is at 4588.75, the Apr 5 high. EUROSTOXX 50 futures also traded lower last week. Price has moved below the 20- and 50-day EMAs and probed support at 3735.00, the Mar 18 low. The move lower undermines the recent bull theme and highlights a developing bearish threat. An extension lower would open 3626.50, 50.0% of the Ma r 7 - 29 rally. Key short-term resistance has been defined at 3944.00, the Mar 29 high.
• In FX, EURUSD remains vulnerable The recent failure at 1.1185, Mar 31 high, highlights a bearish threat. Attention is on 1.0806, the Mar 7 low and a bear trigger. The GBPUSD outlook remains bearish and the pair has probed the key support at 1.3000, Mar 15 low and the near-term bear trigger. The focus is on 1.2954, 1.764 projection of the Jan 13 - 27 - Feb 10 price swing. Resistance is at 1.3136, the 20-day EMA. USDJPY has started the week on a firmer note and has breached 125.09, the Mar 28 high. The break confirms the end of the recent corrective cycle and more importantly, marks a resumption of the primary uptrend. This paves the way for strength towards 125.86 next, the Jun 5 2015 high and a major resistance.
• On the commodity front, Gold is firmer today but remains inside its range. The yellow metal recently found support at $1890.2, on Mar 29, and this level still represents the short-term bear trigger. Initial resistance is at $1966.1, Mar 24 high. In the Oil space, WTI futures traded lower last week, resulting in a breach of the 50-day EMA. The print below this average suggests scope for a continuation lower. The focus is on the next key support at $92.20, Mar 15 low. Initial firm resistance has been defined at $105.59, the Apr 5 high.
• In the FI space, Bund futures have traded to a fresh cycle low today, confirming a resumption of the primary downtrend. The next objective is 155.03, the Dec 4 2015 low (cont). Gilts continue to trade lower and recent weakness has confirmed a resumption of the primary downtrend. The focus is on 118.93, the Apr 26 2016 low (cont). Treasuries are weaker too as the downtrend extends. This has opened 119-04+ next, the Dec 3 2018 low (cont).

EQUITIES: French equities buoyed by election; others down as yields rise

• Japan's NIKKEI down 164.28 pts or -0.61% at 26821.52 and the TOPIX down 7.15 pts or -0.38% at 1889.64.
• China's SHANGHAI closed down 84.724 pts or -2.61% at 3167.126 and the HANG SENG ended 663.71 pts lower or -3.03% at 21208.3.
• German Dax down 56.03 pts or -0.39% at 14229.64, FTSE 100 down 17.48 pts or -0.23% at 7652.14, CAC 40 up 45.65 pts or +0.7% at 6593.7 and Euro Stoxx 50 up 0.74 pts or +0.02% at 3859.42.
• Dow Jones mini down 20 pts or -0.06% at 34602, S&P 500 mini down 17.5 pts or -0.39% at 4466.75, NASDAQ mini down 116.75 pts or -0.81% at 14211.5.

COMMODITIES: Crude under pressure this morning

• WTI Crude down $2.46 or -2.5% at $95.85
• Natural Gas (NYM) up $0.08 or +1.23% at $6.357
• Natural Gas (ICE Dutch TTF) down $2.28 or -2.2% at $101.7
• Gold spot up $7.1 or +0.36% at $1953.91
• Copper down $1.3 or -0.28% at $471.4
• Silver up $0.23 or +0.93% at $24.9947
• Platinum up $12.92 or +1.32% at $991.2