MNI ASIA MARKETS ANALYSIS: Dollar Gains Ahead Of US CPI

MNI (NEW YORK) -

HIGHLIGHTS:

• The Treasury curve leaned bull flatter Monday ahead of Tuesday's US CPI release with Fed rate pricing unchanged.
• Gilts outperformed Bunds ahead of key UK labour market data.
• The dollar finished the session stronger, rising against most others in G10 in a relief rally and clear out of positioning ahead of the CPI print. 

US TSYS: Leaning Bull Flatter Ahead Of CPI

The Treasury curve leaned bull flatter Monday ahead of Tuesday's CPI release.

• With no key data or Fed speakers on Monday's schedule, and looming CPI being the week's most impactful release, trading was relatively subdued and focused more on geopolitical developments.
• That included anticipation of the Trump-Putin meeting later this week per the Ukraine conflict, and the China tariff truce which was due to expire Tuesday (but per CNBC has been extended by 90 days as widely expected).
• In contrast to last week's reports which drew a small but notable reaction (namely firming the USD), there was little reaction to a Bloomberg report that current FOMC members Vice Chair for Supervision Bowman, Vice Chair Jefferson, and Dallas Fed's Logan are in the running to succeed current Fed Chair Powell.
• Indeed Bowman's comments over the weekend re eyeing 3 rate cuts by year-end were largely taken in stride as she's been a vocal (and dissenting) dove in recent months.
• Implied Fed funds were unchanged through year-end, still eyeing 57bp of cuts. Tsy yields traded within Friday's ranges overall, with volumes light (725k TYU5 contracts traded through 3:45ET)
• As noted, Friday sees a busier schedule including CPI - MNI's preview is here. Consensus sees core CPI inflation at 0.3% M/M and unrounded analyst estimates broadly echo this with a median 0.32% M/M. We also hear from Fed's Barkin (non-2025 voter) and Schmid (2025 voter, hawk) after CPI, with other data including the NFIB small business survey and the Federal budget statement.
• Latest levels: The 2-Yr yield is down 0.4bps at 3.758%, 5-Yr is down 0.7bps at 3.8242%, 10-Yr is down 1.2bps at 4.2713%, and 30-Yr is down 0.9bps at 4.8403%. Sep 10-Yr futures (TY) up 1.5/32  at 111-28 (L: 111-25 / H: 112-0-)

MNI US CPI Preview: High Early Bar To September Fed Hold

The CPI report for July is released on Tuesday Aug 12, at 0830ET. Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June and unrounded analyst estimates broadly echo this with a median 0.32% M/M. It would mark a further acceleration from 0.23% M/M in June and 0.13% M/M in May for its fastest pace since January, with the latest firming seen coming from core goods inflation doubling to 0.4% M/M. 

MNI UK Labour Market Data Preview: August 2025 Release

With a continually softening labour market a necessity for another quarterly cut in November, Tuesday’s report will be keenly watched by the market. Unlike last month’s release there is no obvious smoking gun to watch out for as the revision to the flash payrolls print for June has returned the focus back to the wider report. Our primary focus therefore will return to private regular average earnings which are expected at 4.8%Y/Y in the 3-months to June based on the MNI median and Bloomberg consensus (vs 4.88% prior). 

SOFR FIXES AND PRIOR SESSION REFERENCE RATES

US TSYS/OVERNIGHT REPO: Secured Rates Steady, Could Pick Up Later This Week

Secured rates were steady Friday, with SOFR remaining at 4.35%. 

• Rates are expected to print the same or perhaps slightly lower Monday. However pressure could pick up later in the week on Treasury auction settlements. These include $55B in net cash raised by bills on Tuesday and a further $42B on Thursday, followed by $35B in coupon settlements Friday.
• The  effective Fed funds rate remains steady at 4.33%.

REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.35%, no change, $2817B
* Broad General Collateral Rate (BGCR): 4.33%, no change, $1169B
* Tri-Party General Collateral Rate (TGCR): 4.33%, no change, $1139B

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:  $262B

US TSYS/OVERNIGHT REPO: ON RRP Takeup Remains Below $100B

Takeup of the Fed's overnight reverse repo facility ticked up by around $2B to $82.2B Monday, the second consecutive daily increase but the 5th day in 6 below the $100B mark.

• ON RRP takeup has averaged $91B in the first 7 sessions of August, compared with $225B over the first 7 sessions in July.
• Helping reduce appetite for ON RRP is the rise in bill issuance since the debt limit was lifted in early July - a dynamic that is expected to keep a lid on the facility for the foreseeable future (outside of spikes typically seen at month-/quarter-end).

OPTIONS: US Options Roundup - Aug 11 2025

Monday's U.S. bond/rate options flow included:

• FVU5 109/110/111/112 Call Condor bought for 9.5 in 2K (vs 24+, 30%)
• TYU5 112/111.5/111 Put Tree bought for 8 in 1.5k
• TYU5 111.75 Puts sold at 17s in 1.5k (vs 112-02, 42%)
• TYU5 113/111 RR bought the call for 1 in 1K (vs 111-31+, 34%)
• TYV5 112/111 1x2 put spread paper paid -0-01 on 8K
• TYU5 109 Calls bought for 13 in 2.5k
• SFRQ5 95.9375 Call sold at 2.25 in 2K (vs 95.91, 18%)
• SFRU5 95.8125/95.75/95.6875 Put Fly bought for  0.5 in 1K
• SFRU5 96.125/96.25 call spread bought for 1.5 in 10k
  SFRV5 96.50/96.625 call spread bought for 1.75 in 8k (cov 96.24 5%)
• SFRZ5/SFRV5 96.0625/95.875 PS bought for 1.5 in 4.88k (bought SFRZ5 - block)
• SFRZ5 96.50/96.375/96.1875/96.00 Broken Put Condor bought for 2s in 2K
• 0QQ5 96.8125/96.875/96.9375/97.00 Call Condor bought for 2 in 1K

BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Ahead Of Labour Data

Gilts outperformed Bunds Monday ahead of key UK labour market data.

• The session low for yields was set in early trade, with some focus on the potential disinflationary implications of a resolution to the Russia-Ukraine conflict ahead of a Trump-Putin meeting scheduled for end-week.
• That said, the pullback in yields looked corrective in nature, coming after Friday's rise and amid limited macro / data / headline news flow. Yields crept up for most of the remainder of the session.
• That left the German curve relatively unchanged on the day, though Gilts benefited in part from a KPMG-REC report on jobs suggesting weak labour market dynamics / restrained wage growth.
• Periphery/semi-core EGB spreads closed mixed, with Spain outperforming and Greece underperforming. MNI published an exclusive on Greek issuance ("Greek 2026 New Issuance Lower End Of EUR8-10 Bln-Source").
• Tuesday's scheduled highlight is the UK labour market report. MNI's preview is here (PDF): primary focus is on private regular average earnings which are expected at 4.8%Y/Y in the 3-months to June.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.8bps at 1.964%, 5-Yr is up 0.6bps at 2.289%, 10-Yr is up 0.6bps at 2.696%, and 30-Yr is up 2bps at 3.226%.
• UK: The 2-Yr yield is down 3.6bps at 3.863%, 5-Yr is down 3.6bps at 4.001%, 10-Yr is down 3.6bps at 4.565%, and 30-Yr is down 3.6bps at 5.392%.
• Spanish bond spread down 0.3bps at 56.4bps  / Greek up 1.1bps at 65.3bps

OPTIONS: Limited Trade To Open Week, With Sonia Upside Faded Pre-Labour Data

Monday's Europe bond/rate options flow included:

• SFIH6 96.70 calls 3.5K given at 5

FOREX: USD on More Solid Footing into July CPI Print

• The dollar finished the Monday session stronger, rising against most others in G10 in a relief rally and clear out of positioning ahead of the Tuesday US CPI print. The USD's move higher seemingly came in isolation, with the front-end of the US curve and core equity markets proving resilient to the edge higher in the greenback. Resultantly, strength in the USD Monday was likely an extended phase of position-squaring after the soft NFP print earlier this month (USD Index still 1.4% below pre-NFP levels), and ahead of tomorrow's CPI print - the next data input for the September FOMC decision.
• In addition, outside of the EUR, USD gains seemingly have less conviction: GBP/USD has reversed lower after a failed test on the 50-dma of 1.3502, and further weakness here will open 1.3398 support (23.6% retracement for the upleg off the 1.3142 low) ahead of the more notable level at 1.3310. Below here, the bounce will look to have concluded, and a further fade becomes more likely. Tomorrow's wages and unemployment numbers could prove key this week.
• The sole currency to outperform the greenback was NOK. Strength here persisted through Monday, helping EURNOK push through initial support at 11.9326 (23.6% retracement of the upleg off the late July low). The slightly stronger-than-expected July inflation report set the tone for  NOK Monday: although CPI-ATE inflation was actually in line with Norges  Bank's June MPR projections at 3.1% Y/Y, measures of inflation momentum  suggest underlying price pressures remain a little persistent. This should push back against the need for firmer guidance towards a  September cut at Thursday's Norges Bank decision.
• Near-term focus shifts to the RBA rate decision at which the bank are seen trimming rates by a further 25bps to 3.60%. The German ZEW survey then crosses ahead of the July US CPI print. 

OPTIONS: Expiries for Aug12 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1500(E1.5bln), $1.1535-50(E1.2bln), $1.1650(E1.1bln)
• USD/JPY: Y147.30-50($1.6bln)
• AUD/USD: $0.6560-75(A$1.5bln)
• USD/CAD: C$1.3785($664mln)

EQUITIES: Dow Underperforms, Nasdaq Off Record High In Subdued Session

Equities are a little softer Monday, with the Dow Jones off 0.5% vs 0.1-0.2% declines in the S&P 500/Nasdaq. The Nasdaq is set to close a little off its record high set Friday.

• Weighing on the Dow are #3 weighted Caterpillar (-1.8%), IBM (-2.8%) and Salesforce (-2.6%), while top-weighed Goldman Sachs (-0.6%) and #2 Microsoft  (-0.1%) are also lower, with only a handful of names in the green.
• On a sector-by-sector basis, however, Energy is the laggard, with the S&P sub-sector down 0.6% amid flat energy prices ahead of US-Russia-Ukraine peace negotiations later this week. Tech is also a little lower (-0.4%) while consumer categories are leading (discretionary and staples each up 0.3%).
• Driving headlines have been limited, with little reaction to the widely expected news that the US would extend the tariff truce deadline for China by a further 90 days (per CNBC). There were notable program orders a little after noon ET (1,435 NYSE names) and later a sell program at around 2:45pm (908 names) that saw decent short-term moves that were ultimately faded.
• Latest futures levels: Dow Jones mini down 182 pts or -0.41% at 44097, S&P 500 mini down 10.25 pts or -0.16% at 6403.5, NASDAQ mini down 54.25 pts or -0.23% at 23659.25.

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