MNI ASIA MARKETS ANALYSIS: Dollar Bounce From Lows Extends

MNI (NEW YORK) -

HIGHLIGHTS:

• USD Index Extends Bounce from Weekly Lows As Equities Consolidate
• Strong 5Y Auction Helps Treasury Yields Pull Back From Highs
• US GDP And Jobless Claims Data Headline Thursday's Data Docket

US TSYS: Modestly Weaker Having Held Key Round Levels

Cash Treasuries weakened Wednesday after three flat/positive sessions, with some light bear steepening in the cash curve.

• Treasury-negative headlines/macro developments were actually limited (a long-end Japanese bond auction went softly overnight), with yields moving lower in early trade before pushing sharply higher in late morning.
• At that point Tsys, found a bid as 30Ys touched 5.00% with 10Ys just under 4.50%. Overall, trade was mostly within Wednesday's ranges.
• The session featured a very solid 5Y Note auction, which saw a 0.4bp trade-through and a record-high takedown for 5s by indirect bidders (and one of the lowest-ever primary dealer takeups), helping yields consolidate into the close.
• The May FOMC meeting minutes cast a lightly hawkish tone in MNI's view, with little to no emphasis on the possibility of tariff-driven inflation proving to be a one-off shock. However the accounts were seen as relatively stale given developments in the last 3 weeks, and met with limited market reaction.
• In data, regional Fed surveys (Dallas services, Richmond manufacturing and services) were mixed but generally saw some stabilization in May, while Redbook retail sales continued to indicate resilient consumer activity into late May.
• Latest cash levels: 2-Yr yield is up 0.9bps at 3.9901%, 5-Yr is up 3bps at 4.0635%, 10-Yr is up 3.2bps at 4.4753%, and 30-Yr is up 2.1bps at 4.9717%.
• Note that with the Jun/Sep futures roll all but complete (all contracts 90+% through), September becomes the front contract.
• Thursday's schedule includes the 2nd reading of Q1 GDP alongside weekly jobless claims, with appearances by Fed's Barkin, Goolsbee. Kugler, and Daly.

US TSYS/OVERNIGHT REPO: SOFR Jumps Post-Holiday, With Month-End Yet To Come

Secured rates saw a large jump Tuesday versus last week's unusually soft levels, with SOFR up 5bp (vs Friday, after Monday's holiday) to 4.31%. That brings SOFR back to levels last seen on May 15. Elsewhere, GCF Treasury Repo printed 4.38%, up 8bp and the highest since May 2.

• As we noted Tuesday, downward pressures on secured rates last week exerted in part by temporary GSE cash in the system was due to dissipate this week, and upside pressures are likely to persist toward week-end exacerbated by Friday's month-end dynamics.
• Other factors to watch include Friday's $46B in net new cash raised via coupon auction settlements (upward rate pressure), while Thursday's rates could be temporarily subdued in the meantime by $29B in net bill paydown (downward rate pressure).
• Effective Fed funds was as usual unchanged Tuesday (4.33%).

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.31%, 0.05%, $2655B
* Broad General Collateral Rate (BGCR): 4.30%, 0.04%, $1061B
* Tri-Party General Collateral Rate (TGCR): 4.30%, 0.04%, $1025B

New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume:  $115B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume:  $293B

US TSYS/OVERNIGHT REPO: RRP Takeup Jumps, Further Rises Expected To Be Limited

Takeup of the Fed's overnight reverse repo facility jumped Wednesday, rising $35.6B to $173.6B, the second-highest total of the month ($180.4B May 19).

• ON RRP takeup has been somewhat erratic the last few sessions, though it's not expected to rise much past Wednesday's levels (ie remaining below $200B).
• One exception of course could be at the end of this week, given the typical temporary rise amid month-end dynamics.

US Options Roundup: May 28 2025

Wednesday's US rates/bond options flow included:

• SFRM5 96.00/96.12cs traded for -1.5 in 3k
• SFRM5 95.87/95.81/95.75p fly, bought for 3 in 4k
• SFRQ5 95.87^, bought for 23 in 2k
• SFRZ5 95.81/95.68/95.62/95.25 broken put condor, traded for 3 in 3k
• SFRH6 95.62p traded for 6 in 2k
• SFRH6 96.25p vs 2QH6p, bought the 2yr for 1.5 in 6.5k
• SFRH6 95.62/95.50/95.37/95.25p condor, traded for half in 2.5k
• 0QU5 96.00/95.75ps vs 0QV5 96.25/96.00ps spread, traded for the Oct 2.5 in 2.5k
• 0QZ5 96.25/9600/95.62 broken Put Fly, bought for 1.25 in 10k
• FVN5 107.00 puts ~8.3K change hands at 0-07+, flow initially triggered by a buyer

BONDS: EGBs-GILTS CASH CLOSE: Yields Continue To Back Up

European yields backed up Wednesday, continuing their rise from Tuesday's lows, with Gilts underperforming Bunds.

• A soft long-end Japanese bond auction overnight set a weaker tone for global core FI early.
• In data, ECB 1-year ahead inflation expectations surprisingly rose but longer-term expectations were steady, muting the impact.
• On the day, the UK curve leaned bear steeper to the 10Y segment, with 30Y outperforming. The German curve more clearly bear steepened.
• BTPs led broader gains in much of the session, with 10Y yields falling to the lowest levels since February. 10-year EGB periphery/semi-core spreads tightened 0.3-1.0bps vs Bunds on the day.
• Thursday's calendar includes an appearance by BOE's Bailey; in data we get Spanish retail sales, and Italian confidence indicators and industrial sales.
• Attention for the week is on Friday's flash May inflation readings from Germany, Italy and Spain.

Closing Yields / 10-Yr EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 0.6bps at 1.797%, 5-Yr is up 1.4bps at 2.107%, 10-Yr is up 2.2bps at 2.554%, and 30-Yr is up 2.9bps at 3.031%.
• UK: The 2-Yr yield is up 5.5bps at 4.075%, 5-Yr is up 5.4bps at 4.206%, 10-Yr is up 6.1bps at 4.727%, and 30-Yr is up 4.5bps at 5.48%.
• Italian BTP spread down 0.4bps at 98.1bps / French OAT down 0.5bps at 67.3bps  

EUROPE OPTIONS: Broken Put Ladder In Schatz, Euribor Midcurve Package Feature

Wednesday's Europe rates/bond options flow included:

• DUQ5 107.40/107.30/106.90 broken put ladder -0.5 (receive) in 7k.
• SFIZ5 96.20/96.30cs vs 95.95/95.85ps, bought the cs for 1.5 in 4k.
• ERZ5 98.12/98.00/97.87 put ladder paper paid 1.5 on 2.5K
• ERH6 98.12/98.25/98.37/98.50 call condor vs. 98.00/97.87 put spread paper paid 0.5 on 5K, buying the call condor
• As a package:
  • 0RU5 98.37/98.81cs, bought for 7.5 in 10k.
  • 0RM5 98.25c, sold at 7.5 in 4.75k.
  • 0RU5 98.12p, sold at 11.5 in 3k.

FOREX: USD Index Extends Bounce from Weekly Lows to 1.2%

• The greenback continues to trade with a more constructive manner on Wednesday, as a stable equity backdrop provides a more supportive tone for the USD index. This has allowed the DXY to extend the bounce off the week’s lows to 1.2%, narrowing the gap to both the 100.00 handle and initial resistance at the 20-day EMA.
• Headlines and newsflow have been few and far between for markets, with a semblance of stability for the Japanese yield curve also helping contain markets, as well as reduced headlines on the flow of trade deals with the US.
• USDJPY has once again outperformed, rising 0.45% on the session and threatening to close back above the 145.00 handle for the first time since May 16. Despite this week’s strong bounce, a technical downtrend in USDJPY remains intact and short-term gains are considered corrective. On the upside, initial firm resistance to watch is 145.68, the 50-day EMA.
• In similar vein, EURUSD has slipped back below the 1.13 handle as price looks to snap the uptrendline drawn off the early May low. 1.1284, the 38.2% retracement for the upleg off 1.1065, has been tested and clearance below would open the 50-dma which had successfully held as support when tested earlier this month.
• NZD is outperforming following the RBNZ rate decision. While the bank cut rates - as expected - by 25bps to 3.25%, the board suggested that the base rate is near the 'neutral' zone, which may limit the space for further rate cuts ahead.
• Latin American currencies have been notable laggards on the session, as markets react to the firmer dollar and weigh risks related to fiscal and monetary policy trajectories across the region. Both the Mexican peso and the Brazilian real have fallen 0.75%, with the former taking a hit leading into Banxico’s quarterly report, which downgraded both 2025 and 2026 growth forecasts for the Mexican economy.
• The second reading of US Q1 GDP/PCE will take focus on Thursday, before markets turn their attention to Friday’s release of April Core PCE. Central bank rate decisions for the BOK and SARB are also scheduled.

FX OPTIONS: Expiries for May29 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1200(E784mln), $1.1300-15(E540mln)
• USD/JPY: Y144.80-00($2.1bln)
• USD/CAD: C$1.4355-75($1.5bln)

EQUITIES: Equity Downtick Abates, NVDA Earnings Eyed After Close

Equities move to the session's worst levels around 3pm ET though have fully recovered almost as quickly as they fell. 

• There was the biggest sell-side program of the day/week coinciding with the move, 1315 names.
• One potential factor getting attention were headlines from Ukraine's defence minister (via Reuters):
  • "UKRAINE’S DEFENCE MINISTER SAYS HE HANDED OVER UKRAINIAN VERSION OF MEMORANDUM TO HEAD OF RUSSIAN DELEGATION"
  • "UKRAINE’S DEFENCE MINISTER SAYS RUSSIA CONTINUES TO DELAY DELIVERY OF THEIR VERSION" (Reuters)"
• Cash equities remain a little weaker on the day in late New York trade, with the S&P 500 down 0.1%, and only two sectors in the green: tech and communications, both of which outperformed Tuesday as well.
• This comes ahead of highly-anticipated earnings by NVIDIA (6% of the S&P) expected after the close at 1620ET. Markets appear cautiously optimistic, with NVDA +0.9% on the day.

EQUITY TECHS: E-MINI S&P: (M5) Bulls Remain In The Driver’s Seat

• RES 4: 6080.75 High Feb 26   
• RES 3: 6057.00 High Mar 3 
• RES 2: 6000.00 Round number resistance
• RES 1: 5993.50 High May 20 and the bull trigger
• PRICE: 5943.00 @ 14:34 BST May 29
• SUP 1: 5756.50/5728.00 Low May 23 / 50-day EMA and key support
• SUP 2: 5596.00 Low May 7 
• SUP 3: 5455.50 Low Apr 30
• SUP 4: 5355.25 Low Apr 24 

A bullish trend condition in S&P E-Minis remains intact and the latest pullback appears to have been a correction. Last Friday’s sell-off resulted in a print below the 20-day EMA, at 5794.26. A key support lies at 5728.00, the 50-day EMA. A clear break of this average is required to highlight a stronger reversal and signal scope for a deeper retracement. Sights are on the bull trigger at 5993.50, the May 20 high.

DATA/EVENTS CALENDAR

Date	GMT/Local	Impact	Country	Event
29/05/2025	0130/1130	*	AU	Private New Capex and Expected Expenditure
29/05/2025	0800/1000	**	IT	ISTAT Consumer Confidence
29/05/2025	0800/1000	**	IT	ISTAT Business Confidence
29/05/2025	0900/1000		GB	BOE's Breeden opening remarks at conference on non-bank financial sector and financial stability
29/05/2025	1230/0830	***	US	Jobless Claims
29/05/2025	1230/0830	*	CA	Current account
29/05/2025	1230/0830	*	CA	Payroll employment
29/05/2025	1230/0830	***	US	GDP
29/05/2025	1230/0830		US	Richmond Fed's Tom Barkin
29/05/2025	1400/1000	**	US	NAR Pending Home Sales
29/05/2025	1430/1030	**	US	Natural Gas Stocks
29/05/2025	1445/1545		GB	BOE's Saporta panellist on hedge funds' role in recent crises
29/05/2025	1500/1100	**	US	DOE Weekly Crude Oil Stocks
29/05/2025	1500/1600		GB	BOE's Bailey speech and fireside chat at Irish IAIM Dinner
29/05/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
29/05/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
29/05/2025	1700/1300	**	US	US Treasury Auction Result for 7 Year Note
29/05/2025	1800/1400		US	Fed Governor Adriana Kugler
29/05/2025	2000/1600		US	San Francisco Fed's Mary Daly
30/05/2025	2330/0830	**	JP	Tokyo CPI
30/05/2025	2330/0830	*	JP	Labor Force Survey
30/05/2025	2350/0850	**	JP	Industrial Production
30/05/2025	2350/0850	*	JP	Retail Sales (p)
29/05/2025	0025/2025		US	Dallas Fed's Lorie Logan
30/05/2025	0130/1130	*	AU	Building Approvals
30/05/2025	0130/1130	**	AU	Retail Trade