MNI US MARKETS ANALYSIS - Global Yields Shooting Higher

US TSYS SUMMARY: An Incredibly Busy Start to the Week

• Treasuries are drifting lower, inline with EGBs, but are off session lows at the point of typing. Tnote futures found support just short of the 2018 peak in 10yr Yield, at 3.2594%, printed a 3.2458% high.
• Looking ahead, there's no Tier 1 data for the session, but a busy week ahead, with Northern Ireland deliberations today, Fed rate decision on Wedsnesday, and the BoE rate decision on Thursday.
• The week is also packed with ECB speakers plus heavy supply.

EGB/GILT SUMMARY: Post-ECB Sell-Off Continues

European government bonds have traded weaker this morning, extending last week's post-ECB sell off. Equities are also broadly lower as are regional FX versus the dollar.

• The bund curve has sharply bear flattened with yields up 2-12bp and the 2s30s spread narrowing 10bp.
• OATs have underperformed bunds with yields now up 3-14bp and trading near the highs of the day.
• BTPs have underperformed core EGBs, with continued spread widening intensifying fragmentation risks. Yields are now 7-23bp higher, while the 10-year BTP-Bund spread has widened to 232bp - a level not seen since the early days of the pandemic in 2020.
• The ECB's Gediminas Simkus this morning stated that there are upside risks to inflation and the neutral policy rate is currently very low.
• The UK economy unexpectedly contracted in April (-0.3% M/M vs 0.1% expected) with the industrial, construction and service sectors all showing a drop in output.
• Gilts have traded lower with yields up 2-8bp.
• Supply this morning came from Germany (Bubills, EUR1.767bn allotted). Later today France will offer EUR4.7-5.9bn of BTFs.

EUROPE OPTION FLOW SUMMARY

Eurozone:

More aggressive rate hike path pricing via options
ERZ2 98.25/97.75ps, bought up to 8.25 in 45k vs 8.67k at 98.60

FOREX: Dollar Nearing YTD Highs as Bond Rout Persists

• The bond rout is persisting early Monday, with last week's hot CPI fueling a further pricing-in of aggressive easing from G10 central banks this morning. A handful of sell-side institutions have revised their calls for this week's meeting, seeing a 75bps rate rise to ward off accelerating price pressures.
• Resultingly, Treasury yields are surging across the curve, putting the 2yr yield at 3.2%, the highest level since 2007. The greenback is following rates north, putting the USD Index on track to test May's best levels at 105.00 - which marked the strongest USD in twenty years.
• The higher, flatter US yield curve has sapped equity market sentiment, putting US futures deeper into bear market territory as prices continue to chew through the post-pandemic stock rally. This has helped support haven currencies ahead of the NY crossover, with JPY and CHF among the better performing currencies.
• At the bottom-end of the table, NOK and AUD have been dented by the shakier sentiment, while GBP extends recent weakness on the back of a poorer-than-expected monthly GDP release, with April GDP contracting by 0.3% in what's expected to be a rocky few quarters for the economy.
• The Monday speaker and data docket is typically empty, with no major data releases. Fed's Brainard makes an appearance later in the day, but the event is not policy-oriented, with the FOMC remaining inside the pre-meeting media blackout period.

FX OPTIONS: Expiries for Jun13 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0575(E651mln), $1.0625-35(E567mln), $1.0675(E630mln), $1.0745-50(E1.9bln)
• EUR/JPY: Y143.00(E1.6bln)
• USD/CNY: Cny6.85(2.2bln)

Price Signal Summary - Fresh Trend Low In The S&P 500

• In the equity space, S&P E-Minis have started the week on a clear bearish note. Today’s sell-off has resulted in a print below 3810.00, the May 20 low and bear trigger. A clear break would confirm a resumption of the primary downtrend and open 3697.99, 0.618 projection of the Mar 29 - May 20 - 31 price swing. EUROSTOXX 50 futures have weakened again today as the contract extends the reversal from recent highs. The pace of the latest sell-off signals potential for weakness towards key support and the bear trigger at 3466.00, May 10 low. Key short-term resistance has been defined at 3857.00, Jun 6 high. Initial resistance is seen at 3738.70, the 50-day EMA.
• In FX, EURUSD ended last week’s session on a soft note and the short-term outlook remains bearish. The latest key technical development has been the inability to clear the top of its bear channel resistance, drawn from the Feb 10 high - the channel top intersects at 1.0724 today. The reversal lower suggests the May 13 - 30 correction is over. This opens 1.0461 next, the May 18/19 low followed by 1.0350, the May 13 low and bear trigger. The channel base is at 1.0186. Key resistance is at 1.0724/87, the channel top and May 30 high. The latest move lower in GBPUSD highlights a clear reversal of the bull cycle between May 13 - 27. This signals potential for weakness towards key support and the bear trigger at 1.2156, May 13 low. A break of this level would confirm a resumption of the broader downtrend. On the upside, initial firm resistance is seen at 1.2517, the 20-day EMA. USDJPY remains in a clear uptrend and has tested levels above 135.00. Trend conditions remain bullish and a resumption of strength above 135.00 would open 136.04, 1.382 projection of the Feb 24 - Mar 28 - 31 price swing.



• On the commodity front, the short-term outlook in Gold is bullish and attention is on the 50-day EMA, at $1871.7. The yellow metal has traded above the average, a clear break is still required though to signal scope for a stronger rally towards trendline resistance at $1899.0. The trendline is drawn from the Mar 8 high. Note that recent gains are considered corrective and the primary trend direction is down. A resumption of bearish activity would refocus attention on $1787.0, May 16 low. In the Oil space, WTI futures remain bullish and the uptrend is intact. The focus is on $123.35, 1.236 projection of the May 11 - 17 -19 price swing. Key short-term support is at $114.77, the 20-day EMA
• In the FI space, Bund futures continue to weaken. The focus is on 146.00 and 145.85, 1.764 projection of the Apr 28 - May 9 - 12 price swing. Gilts continue to head south, the focus is on 112.10 3.236 proj of the May 19 - 24 - 26 price swing.

EQUITIES: Futures Touch Fresh Post-2020 Lows Amid Global Rout

• Japan's NIKKEI closed down 836.85 pts or -3.01% at 26987.44 and the TOPIX ended 42.03 pts lower or -2.16% at 1901.06. China's SHANGHAI closed down 29.283 pts or -0.89% at 3255.551 and the HANG SENG ended 738.6 pts lower or -3.39% at 21067.58.
• European futures are off sharply, with the German Dax down 297.86 pts or -2.16% at 13761.83, FTSE 100 down 133.61 pts or -1.83% at 7317.52, CAC 40 down 151.85 pts or -2.45% at 6187.23 and Euro Stoxx 50 down 86.02 pts or -2.39% at 3599.2.
• U.S. futures are sinking, with tech leading the way lower: Dow Jones mini down 599 pts or -1.91% at 30789, S&P 500 mini down 93.75 pts or -2.4% at 3805.25, NASDAQ mini down 346.25 pts or -2.92% at 11493.75.

COMMODITIES: Sharp Losses Across Energy And Metals

• WTI Crude down $1.97 or -1.63% at $119.6
• Natural Gas down $0.2 or -2.21% at $8.68
• Gold spot down $16.7 or -0.89% at $1869.58
• Copper down $8.7 or -2.03% at $428.95
• Silver down $0.41 or -1.86% at $21.9305
• Platinum down $27.43 or -2.81% at $977.2