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Free AccessMNI ASIA MARKETS ANALYSIS:BOE/ECB 50Bp Hikes/Mkt Pens In Pivot
HIGHLIGHTS
- MNI: BOE MPC HIKES 50BPS TO 4.0%
- MNI ECB HIKES MLF 50 BPS TO 3.25% (PREV 2.75%)
- MNI WHITE HOUSE: Statement: Deese To Depart As Economic Council Director
- MNI TURKEY: Fin Min Nebati: No Reverse In Monetary Policy After Elections
- MNI US-CHINA: Sec State Blinken To Meet President Xi In China
Key links: MNI INTERVIEW: Fed Could Need To Hike Again After Pause-Ireland / MNI US Payrolls Preview: Watching AHE For Rate Cut Direction / MNI Fed Review - Feb 2023: Only As Hawkish As The Data Allow / MNI: BOE Hikes 50bp; Further Action If Price Pressures Persist / MNI WATCH: ECB Points To Another 50Bps Hike In March
![](https://marketnews.com/media-library/image.png?id=32973423&width=980)
US TSYS: European Mkts Discount Policy Hawks Too
Tsys finish steady (10s) to mildly higher - well off early session highs as markets surged in the aftermath of the BOE and ECB both hiking rates 50bp following Wed's 25bp hike from the FOMC.
- Focus turns to Fri's employment read for January (+190k est vs. +223k prior), Fed out of Blackout w/ SF Fed Daly first "scheduled" speaker on Fox Business at 1430ET.
- Similar to Wed's post-FOMC reaction, European yields marching lower in anticipation of the BoE/ECBs policy pivot sooner than later. (Bund 10Y yld -23.5bp post ECB, for second largest decline on record, while Italian BTP 10Y yield saw largest decline in nearly 3 years to 3.9).
- Additional impetus, ECB Pres Lagarde said “the economy has proved more resilient than expected and should recover over the coming quarters,” as higher wages, falling energy costs and government support programs will boost real incomes from depressed levels.
- Policy annc's clouded any market react to US data: Initial jobless claims came in lower than expected once again, down from an unrevised 186k to 183k (cons 195k) in the week to Jan 28; Stronger than expected labor productivity in Q4 (and Q3 after an upward revision) pushes unit labor costs to the softest quarterly growth rate since 1Q21.
- Large 5s30s flattener block (-18,300 FVH3 110-02.5, sell-through 110-03.25 post-time bid vs. +6,000 USH3 132-04, buy through 132-03 offer added to long end support; over 15,000 FHH sale blocks follow (110-02 to 109-20.
SHORT TERM RATES
US DOLLAR LIBOR: Latest settlements:
- O/N +0.24971 to 4.54657% (+0.24186/wk)
- 1M +0.00500 to 4.58000% (+0.00113/wk)
- 3M +0.00985 to 4.80614% (-0.01915/wk)*/**
- 6M -0.02800 to 5.05986% (-0.04243/wk)
- 12M -0.03543 to 5.27986% (-0.03628/wk)
- * Record Low 0.11413% on 9/12/21; ** New 14Y high: 4.82971% on 1/12/23
- Daily Effective Fed Funds Rate: 4.33% volume: $106B
- Daily Overnight Bank Funding Rate: 4.32% volume: $276B
- Secured Overnight Financing Rate (SOFR): 4.31%, $1.199T
- Broad General Collateral Rate (BGCR): 4.27%, $487B
- Tri-Party General Collateral Rate (TGCR): 4.27%, $472B
- (rate, volume levels reflect prior session)
FED Reverse Repo Operation
![](https://marketnews.com/media-library/image.png?id=32973111&width=980)
NY Federal Reserve/MNI
NY Fed reverse repo usage climbs to $2,050.063B w/ 101 counterparties vs. prior session's $2,038.262B. Compares to Friday, Dec 30 record/year-end high of $2,553.716B (prior record high was $2,425.910B on Friday, September 30.
EURODOLLAR/SOFR/TREASURY OPTIONS SUMMARY
Second consecutive session of heavier option volumes, SOFR and Treasury derivatives starting off with better low delta put buying/positioning while the former segued to better calls (mixed) and vol sellers in the second half. Chunky vol sales included -20k Dec'23 SOFR 95.68 and -15k 95.75 straddles, and -5k Red Dec'24 97.12 straddles at 115.0. Salient trade:- SOFR Options:
- -15,000 SFRJ3 95.25/95.37 call spds 1.75 ref 95.14
- -15,000 SFRZ3 95.75 straddles, 67.0 ref 95.70
- 2,700 SFRZ3 95.50/95.75/96.00 put flys ref 95.715
- Blocks, 17,000 SFRZ3 97.50/98.00 call spds, 1.5 ref 95.74
- Block, 5,000 SFRU4 93.00/95.00 put spds, 6.0 ref 97.045
- Block, -5,000 SFRZ4 97.12 straddles at 115.0 ref 97.17
- Blocks, -20,000 SFRZ3 95.68 straddles, 67.0 ref 95.745
- Block, 5,000 OQH3 95.62/95.87 put spds, 3.0
- Block, 5,590 SFRM4 94.50/95.50 put spds, 9.0
- +5,000 SFRJ3 94.87/94.93/95.06 put trees, 2.5
- 26,000 OQH3 96.75/97.00/97.25 call flys, ref 96.21 - .205
- Block, 3,000 SFRZ3 96.00/96.25 call spds 2.0 over 3QM3 97.75/98.00 call spds
- Blocks, 15,000 SFRM4 94.00/95.00 put spds, 5.0-4.5 ref 96.71
- Blocks, 10,000 SFRH4 94.00/95.00 put spds, 6.0-5.5 ref 96.215
- 4,000 OQG396.25/96.37/96.50/96.62
- 15,000 SFRJ3 95.00/95.06/95.12 put flys
- 4,500 OQH3 96.75/97.00/97.25 call flys, ref 96.195
- Block/screen, 13,500 SFRJ3 95.00/95.06/95.12 put flys, 0.5 ref 95.14
- Block, 5,000 SFRK3 94.75/94.87 put spds, 0.75 ref 95.14
- Block, 2,500 SFRM3 94.62/94.81 put spds, 1.0 ref 95.14
- Treasury Options:
- 7,250 USH 126/128 put spds, 8.0 ref 132-09
- over 18,000 FVH3 108.25/109.25 put spds, 11 ref 110-02.75 to -02.5
- 3,000 TYH3 115/117 strangles, 46 ref 115-19.5
- 11,500 TUM3 102.5/102.75/103/103.25 put condors ref 103-19.12
- -10,000 wk2 TY 115.75/116.25 call spds, 14 vs. 115-25.5
- 5,000 TYH3 115.75/116.5 call spds, ref 115-25
- +5,000 TYJ3 117 calls, 45-47
- over +20,000 TYH3 113.5/114.5 2x1 put spds, 4 ref 115-18.5
- 2,900 FVH3 108 puts, 3 ref 109-28
- over 7,200 weekly 10Y 116/116.5 call spds
- over 6,000 TYH3 114 puts ref 115-11
- 5,000 FVH3 109 puts, 12 ref 109-26.75
EGBs-GILTS CASH CLOSE: Massive Rally On ECB And BoE Doubts
Bunds had a historic rally but were outperformed by Gilts and periphery EGBs Thursday as the BoE and ECB meetings suggested potential for more dovish rate hike paths ahead than previously expected.
- Following on from a dovish-leaning Fed press conference Wednesday, the BoE delivered a 50bp hike but didn't fully commit to further raises. And the ECB, which also hiked 50bp, was seen as wavering in its previous guidance to hike another half-point at the March meeting.
- The bond market moves appeared disproportionate given policymakers' overall cautious tone, but the rally accelerated in the afternoon in what appeared to be panic buying.
- 10Y Bund yields at one point were set to have their 2nd-biggest daily rally in the euro era (it ended as the 4th biggest), and yet were easily outperformed by BTPs which saw spreads drop ~19bp.
- Not to be outdone, 10Y Gilt yields had their biggest drop since 1994 (outside of last year's mini-budget related volatility).
- The US employment report will be Friday's focus, capping a busy week.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 17.5bps at 2.497%, 5-Yr is down 22.1bps at 2.097%, 10-Yr is down 20.4bps at 2.08%, and 30-Yr is down 12.6bps at 2.101%.
- UK: The 2-Yr yield is down 23.8bps at 3.201%, 5-Yr is down 30.4bps at 2.875%, 10-Yr is down 30.1bps at 3.006%, and 30-Yr is down 18.9bps at 3.523%.
- Italian BTP spread down 18.9bps at 182.4bps / Spanish down 8.1bps at 91.6bps
EGB Options: Closing Out Of Bund Call Fly Post-ECB
Thursday's Europe rates / bond options flow included:
- DUH3 105.30/105.10ps, bought for 4 in 3k
- OEH3 116/115 put spds bought for 12 in 8.25k
- RXM3 141/144/147 call fly sold at 36/37.5, in 8k all day. Hearing closing
- ERK3 96.25/96.00ps, bought for 2.5 in 6.75k
FOREX: Safe Haven Demand As Global Yields Fall Sharply, GBP Under Pressure
- Historic rallies for European/UK Government bonds on Thursday weighed heavily on the Euro and GBP as the BoE and ECB meetings suggested potential for more dovish rate hike paths ahead than previously expected.
- Following on from a dovish-leaning Fed press conference on Wednesday, US yields also shifted lower, however, the more moderate moves worked in favour of the greenback overall, with the USD index rising roughly 0.5%.
- Lower core yields also benefitted the Japanese yen which sits just behind the USD as one of the top G10 performers. The weakness in cross/JPY was certainly a yield play on Thursday as the dovish interpretations of major policy meetings kept global equity indices on an overall buoyant trajectory.
- The likes of EUR, AUD and CHF all fell between 0.6-0.9%, slowly erasing the post FOMC gains seen yesterday. GBP declines of 1.14% standout with 1.24 capping the topside in cable and the pair breaking below initial firm support at 1.2264, the Jan 24 low.
- EURGBP continues to trade with a stealthy bid tone and this week’s bull run reinforces a technically bullish theme and the cross has pierced resistance at 0.8897, the Jan 13 high and a bull trigger. A clear break of this level would confirm a resumption of the uptrend that started early December last year.
- Focus turns to Friday’s US employment report for January, where the Bloomberg median sees nonfarm payrolls rising 190k after a broadly in line 223k December print. The Fed will also come out of blackout with SF Fed Daly the first scheduled speaker at 1900GMT/1430ET.
FX: Expiries for Feb03 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0770-75(E739mln), $1.0850-60(E1.4bln), $1.0950(E1.6bln), $1.0975-80(E640mln), $1.1000(E1.5bln)
- GBP/USD: $1.2325(Gbp1.5bln)
- EUR/GBP: Gbp0.8840(E673mln)
- USD/JPY: Y127.00($545mln), Y129.50-55($1.1bln), Y130.00($1.0bln)
- EUR/JPY: Y138.15(E500mln)
- USD/CAD: C$1.3300($960mln), C$1.3400-05($670mln), C$1.3500($3.0bln)
- USD/CNY: Cny6.8000($1.1bln)
Late Equity Roundup: Pare Gains Ahead Jan Employ Data; Late Earnings
Major indexes trade mostly higher, DJIA continues to lag SPX eminis and Nasdaq while the latter moving off late session highs ahead Friday's employment data. SPX eminis currently trades +39.25 (0.95%) at 4171; DJIA -170.46 (-0.5%) at 33920.01; Nasdaq +287.3 (2.4%) at 12100.99.
- SPX leading/lagging sectors: Communication Services sector remains strong (+5.57%), outpacing Consumer Discretionary (+1.99%) and Information Technology (+1.77%). Interactive media and services shares lead the rally, particularly Meta (formerly Facebook) +24.52%, followed by Google (+5.59%), Dish (+4.15%). Auto makers supported Consumer Discretionary for a third session w/ GM +5.24%, Tesla +4.22% and F +3.77%. IT lead by hardware makers (ZBRA +5.20%, FFTV +4.89%, STX +3.19%).
- Laggers: Energy (-3.10%) weighed by O&G drillers, refiners and equipment servicers (COP -6.24%, SLB -6.03%, HAL -5.61%, HES -4.62%). Health Care (-1.16%) and Consumer Staples (-1.07%) follow.
- Dow Industrials Leaders/Laggers: Rebounding from prior session sales Home Depot (HD) gained +10.28 at 338.37, Microsoft (MSFT) +9.25 at 262.00, Apple (AAPL) +4.19 at 149.62. Laggers: United Health (UNH) hammered: -27.53 at 469.47, Caterpillar (CAT) -5.67 at 243.87, Travelers (TRV) -5.21 at 180.02.
- Earning after the close: AAPL($1.94 est), F ($.61 est), Google ($1.19 est), QCOM ($2.34 est), AMZN ($0.17 est), GILD ($1.50 est), SBUX ($0.77 est).
E-MINI S&P (H3): Approaching Key Resistance
- RES 4: 4300.00 Round number resistance
- RES 3: 4250.00 High Aug 26, 2022
- RES 2: 4194.25 High Sep 13
- RES 1: 4180.00 High Dec 13 and the bull trigger
- PRICE: 4170.50 @ 1445ET Feb 3
- SUP 1: 4007.50/3969.70 Low Jan 31 / 50-day EMA
- SUP 2: 3901.75 Low Jan 19
- SUP 3: 3788.50 Low Dec 22 and a key support
- SUP 4: 3735.00 Low Nov 3
S&P E-Minis traded higher Wednesday and in the process cleared recent highs to confirm a resumption of the current bull cycle that started Dec 22. Price is higher again today. The break exposes the key resistance and bull trigger at 4180.00, the Dec 13 high. Clearance of this level would confirm resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support has been defined at 4007.50, the Jan 31 low.
COMMODITIES: Dollar Rebound Takes Edge Off Oil and Notably Gold
- Crude and spreads continued to pull back today as the US dollar strengthened on the ECB in a reversal of yesterday's post-FOMC slide, along with the market focused on oil demand growth concerns. The decline gathered pace late in the session along with equities also pulling, perhaps with an eye on tomorrow's payrolls report.
- ConocoPhillips, the largest independent oil producer in the US, slumped after signaling it will spend more in expanding output and return less capital to shareholders than last year - Bloomberg
- In LNG space, Freeport has requested permission from FERC to begin additional operations as it moves nearer to a much-delayed reopening.
- WTI is -1.0% at $75.66 having earlier pushed through support at $75.08 (76.4% of Jan 5-18 bull leg) to open $72.74 (Jan 5 low).
- Brent is -1.0% at $81.99, clearing support at $82.06 (61.8% retrace of Jan 5-23 rally) to open $77.77 (Jan 5 low)
- Gold is -1.0% at $1939.93 on that rebound for the USD, after the yellow metal surged to clear its bull trigger after the FOMC yesterday. It’s still some way off support at $1906.8 (20-day EMA).
Friday Data Calendar
Date | GMT/Local | Impact | Flag | Country | Event |
03/02/2023 | 0030/0930 | ** | ![]() | JP | IHS Markit Final Japan Services PMI |
03/02/2023 | 0145/0945 | ** | ![]() | CN | IHS Markit Final China Services PMI |
03/02/2023 | 0700/0800 | * | ![]() | NO | Norway Unemployment Rate |
03/02/2023 | 0745/0845 | * | ![]() | FR | Industrial Production |
03/02/2023 | 0815/0915 | ** | ![]() | ES | S&P Global Services PMI (f) |
03/02/2023 | 0845/0945 | ** | ![]() | IT | S&P Global Services PMI (f) |
03/02/2023 | 0850/0950 | ** | ![]() | FR | IHS Markit Services PMI (f) |
03/02/2023 | 0855/0955 | ** | ![]() | DE | IHS Markit Services PMI (f) |
03/02/2023 | 0900/1000 | ** | ![]() | EU | IHS Markit Services PMI (f) |
03/02/2023 | 0930/0930 | ** | ![]() | UK | S&P Global Services PMI (Final) |
03/02/2023 | 1000/1100 | ** | ![]() | EU | PPI |
03/02/2023 | 1215/1215 | ![]() | UK | BOE Pill & Shortall MPR National Agency Briefing | |
03/02/2023 | 1300/1400 | ![]() | EU | ECB Elderson Speech at Climate Outreach Event | |
03/02/2023 | 1330/0830 | *** | ![]() | US | Employment Report |
03/02/2023 | 1445/0945 | *** | ![]() | US | IHS Markit Services Index (final) |
03/02/2023 | 1500/1000 | *** | ![]() | US | ISM Non-Manufacturing Index |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.