US MARKETS ANALYSIS - US Curve Flatter Pre-IJC

US TSYS SUMMARY: Steady Gains Ahead Of Jobless Claims

Treasuries have steadily gained for most of the overnight session, though within ranges and on limited volumes, with the curve flattening.

• Jun 10-Yr futures (TY) up 1.5/32 at 131-28 (L: 131-21 / H: 131-28.5); sub-par volumes (~220k).
• The 2-Yr yield is down 0.4bps at 0.1488%, 5-Yr is down 2.1bps at 0.848%, 10-Yr is down 2.8bps at 1.6457%, and 30-Yr is down 2.9bps at 2.3323%. Note, curve came off session's flattest levels following a steepener block trade at 0509ET (+15k FV futs @ 123-27, -4.2k US futs @ 156-13).
• S&P futs indicate another record high incoming; dollar off morning lows, now mixed/flat.
• Fed Chair Powell appears on an IMF panel at 1200ET (topic is whether "vaccines can foster more inclusive growth"). We also hear from St Louis's Bullard (1100ET) and Minn's Kashkari (1400ET).
• Weekly jobless claims at 0830ET the only data point of note.
• Reminder, March FOMC minutes out Weds offered few surprises for anyone who's listened to Fed leadership over the past three weeks, though Powell's comments on administered rates adjustments were of some note.
• In supply, $80B of 4-/8-week bill auction at 1130ET; we also get bill and coupon auction announcements at 1100ET. NY Fed buys ~$2.425B of 1-7.5Y TIPS.

EGB/GILTS SUMMARY: German Curve Bull Flatter

Bund trades in a 27 ticks range (171.63-171.90) this morning as the US starts to join the session.

• German curve remains bull flatter since the cash open, but early upside in the long end contract have been limited ahead of heavy supplies from Spain and France.
• With supplies out of the way, Bund trends at the upper range
• Peripherals sees Portugal 0.8bp wider, and Greece 1.6bp tighter versus the German 10yr
• Gilts saw similar price action, initially weighted by the UK supplies, but the contract is underpinned, following MHRA's decision yesterday to stop Astra vaccination for the under 30.
• Looking ahead, US IJC is the only notable data. ECB will publish their minutes. Fed Bullard and Kashkari on Economy.
• Fed Powell is in an IMF panel, as well as Riksbank Ingves and Breman.
• Jun Bund futures (RX) up 16 ticks at 171.83 (L: 171.63 / H: 171.9)
• Germany: The 2-Yr yield is down 0.6bps at -0.709%, 5-Yr is down 0.4bps at -0.661%, 10-Yr is down 0.4bps at -0.328%, and 30-Yr is unchanged at 0.231%.
• Jun Gilt futures (G) up 3 ticks at 128.23 (L: 128.12 / H: 128.25)
• UK: The 2-Yr yield is down 0.4bps at 0.06%, 5-Yr is up 0.1bps at 0.359%, 10-Yr is up 0.8bps at 0.781%, and 30-Yr is up 0.9bps at 1.324%.
• Jun BTP futures (IK) up 23 ticks at 149.22 (L: 148.97 / H: 149.36)
• Jun OAT futures (OA) up 17 ticks at 162.37 (L: 162.16 / H: 162.46)

EUROPE ISSUANCE: UK, French & Spanish Auctions

UK DMO sells GBP2.75bln 0.25% Jul-31 gilt, Avg yield 0.892% (Prev. 0.868%), Bid-to-cover 2.97x (Prev. 2.75x)

France sells:
- E2.235bln 0% Nov-29 OAT, Avg yield -0.180% (Prev. 0.030%), Bid-to-cover 2.65x
- E6.569bln 0% Nov-31 OAT, Avg yield 0.000% (Prev. -0.070%), Bid-to-cover 1.65x
- E2.030bln 0.75% May-52 OAT Avg yield 0.780% (Prev. 0.720%), Bid-to-cover 2.33x

Spain sells 5/7y Bonos, 23y Obli, 12y ObliEi
- E2.469bln 0% Jan-26 Bono, Avg yield -0.289% (Prev. -0.250%)
- E2.127bln 0% Jan-28 Bono, Avg yield -0.035% (Prev. 0.000%)
- E0.889bln 5.15% Oct-44 Obli, Avg yield 1.056%
- E0.623bln 0.70% Nov-33 Obli-Ei Avg yield -0.908% (Prev. -0.906%)

EUROPE OPTION FLOW SUMMARY

Eurozone:
DUK1 112.20/112.10ps. 1x2, sold at 4 in 4k
DUK1 112.10p, bought for 2in 5k

0RU1 100.37/100.50/100.62c fly 1x3x2, bought for -0.5 (receive) in 2.5k~
3RU1 with 3RZ1 100.37/100.50/100.62c fly 1x3x2 strip, bought for 1.25 in 1k

UK:
2LM1 99.62/99.50ps vs 99.87c, sold the ps at 7 in 4.5k

FOREX: Mixed Session for USD, Better Offered On the Margin

A mixed session for the USD during our morning European session.

• On the margin the Dollar is better offered in G10, a continuation of the light overnight session, following S&P hitting an all time record high.
• USD is up 0.18% against the NOK, and down 0.38% versus the SEK.
• USDJPY hovers near session low, lower US yields and Equities off their best levels is contributing somewhat.
• USD is still trading mixed with better buying against GBP, CNH, CAD.
• USDJPY support comes at 109.36 20-day EMA.
• EURUSD is up 0.03% against the Greenback, and some focus on large options expiry for today, with 6.03bn between 1.1840-1.1910.
• Turnovers have been on the low side, with G10 crosses trading at ~30% of 5 days average.
• Cable is flat, after attempting to fade some of yesterday's weakness, on Astra vaccine concerns and after MHRA's decision to stop AstraZeneca vaccinations of people under 30s
• Question for Europe, is whether they will follow EMA's guidance on vaccinations, or will most EU countries match UK MHRA's decision to pause Astra vaccination for under 30s.
• Looking ahead, US IJC is the only notable data. ECB will publish their minutes. Fed Bullard and Kashkari on Economy..
• Fed Powell is in an IMF panel, as well as Riksbank Ingves and Breman.
• RBNZ's Ha to Speak at Citi Conference

FX OPTIONS: Expiries for Apr08 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1690-1.1700(E2.1bln), $1.1720-30(E1.9bln-EUR puts), $1.1750-55(E1.1bln-EUR puts), $1.1800(E1.94bln, E1.76bln of EUR puts), $1.1840-50(E1.5bln, E1.36bln EUR puts), $1.1885-95(E1.7bln), $1.1900-10(E2.9bln-EUR puts)
• USD/JPY: Y108.45-55($1.3bln-USD puts), Y108.60-70($1.5bln), Y108.80-86($1.2bln), Y109.00-05($561mln), Y109.50($817mln, $767mln USD puts), Y109.75($985mln-USD puts), Y110.15-20($535mln)
• GBP/USD: $1.3890-1.3900(Gbp433mln)
• EUR/GBP: Gbp0.8500(E600mln-EUR puts), Gbp0.8550-55(E981mln-EUR puts)
• USD/CHF: Chf0.9400($540mln)
• AUD/USD: $0.7665-80(A$964mln-AUD puts), $0.7700-20(A$1.6bln)
• EUR/AUD: A$1.5410(E720mln)
• USD/CAD: C$1.2650-55($525mln)

Price Signal Summary - USDJPY Correction Extends

• In the equity space:
  • S&P E-minis have traded higher today reaching highs just short of 4100.00. The next objective is 4124.75, 1.382 projection of the Feb 1 - Feb 16 - Mar 4 price swing.
  • EUROSTOXX 50 maintains a bullish tone with the focus on 4000.00. A break would open 4047.72, 2.236 projection of the Dec 21 - Jan 8 - Jan 28 price swing
• In the FX world, EURUSD maintains a short-term bullish tone and is trading closer to recent highs. The focus is on 1.1941, the 50-day EMA and a key resistance area. The GBPUSD outlook remains bearish. Recent gains have stalled at the former bull channel base drawn off the Nov 2 low. Resistance has been defined at 1.3919, Tuesday's intraday high. Continued weakness would expose key support at 1.3670, Mar 25 low. EURGBP rallied yesterday. The price pattern on Tuesday is a bullish engulfing candle. This exposed the next key resistance zone at 0.8646, Mar 24 high and S/T reversal trigger and 0.8653, the50-day EMA. These levels have been probed although clear break is still required to trigger stronger gains and open 0.8731, Feb 26 high. USDJPY edges lower as the corrective cycle extends. The next support is at 109.36, 20-day EMA. A break would open 109.13, Mar 26 low.
• On the commodity front:
  • Gold is holding onto recent gains. Key resistance is $1755.5, Mar 18 high, where a break is required to suggest scope for a stronger bounce.
  • Brent (M1) key directional triggers are unchanged with:
    • Resistance at $65.39, Mar 29 high and key support at $60.33, Mar 23 low and the bear trigger.
  • WTI (K1) directional triggers are:
    • Resistance at $62.27, Mar 30 high and support at $57.25, Mar 23 low and the bear trigger
• In the FI space, Bunds (M1) remain vulnerable despite recent gains. Key support to watch is at 170.52, Mar 18 low. Key resistance is at 172.66, Mar 25 high. The key support and bear trigger in Gilts (M1) remains 126.79, Mar 18 low.

EQUITIES: S&P Futs Touch Record Highs (Again)

• Asian stocks closed mixed, with Japan's NIKKEI down 21.81 pts or -0.07% at 29708.98 and the TOPIX down 15.57 pts or -0.79% at 1951.86. China's SHANGHAI closed up 2.93 pts or +0.08% at 3482.555 and the HANG SENG ended 333.27 pts higher or +1.16% at 29008.07.
• European equities are higher, with the German Dax up 16.16 pts or +0.11% at 15228.6, FTSE 100 up 10.43 pts or +0.15% at 6885.32, CAC 40 up 28.34 pts or +0.46% at 6130.66 and Euro Stoxx 50 up 14.56 pts or +0.37% at 3970.45.
• U.S. futures continue to gain, led by the NASDAQ, with the Dow Jones mini up 21 pts or +0.06% at 33349, S&P 500 mini up 13.5 pts or +0.33% at 4083.5, NASDAQ mini up 102.5 pts or +0.75% at 13707.25.

COMMODITIES: Oil Lags Broader Gains

• WTI Crude down $0.34 or -0.57% at $59.41
• Natural Gas down $0.03 or -1.11% at $2.489
• Gold spot up $5.84 or +0.34% at $1743.79
• Copper up $2.65 or +0.65% at $407.85
• Silver up $0.09 or +0.36% at $25.3397
• Platinum down $0.99 or -0.08% at $1234.03