MNI ASIA MARKETS ANALYSIS: Pre-FOMC Position Squaring

HIGHLIGHTS

• Treasuries recover from early post-data selling, position squaring ahead Wednesday's FOMC policy announcement
• Housing starts were far stronger than expected as were Import price inflation and Industrial production measures.
• US$ retreated from morning highs, mildly lower after the bell, Stocks weaker as risk sentiment cooled ahead the FOMC

MNI US TSYS: Focus Turns to Wednesday's FOMC

• Treasuries look to finish higher Tuesday, off late session highs, curves mixed after rebounding off Monday's lows earlier.
• Treasury futures had retreated/extended lows after this morning's data: Housing starts were far stronger than expected in February at 1,501k (1,385k expected, 1,350k prior after -16k revision), effectively reversing the sharp drop in January that may have been weather-impacted, following the jump in December to 1,526k. Building permits, which have been much less volatile of late, came in closer to the mark at 1,456k (1,453k expected, 1,473k prior unrevised).
• Import price inflation was stronger than expected in February, printing 0.4% M/M (0.0% consensus, 0.4% prior after +0.1pp rev), while ex-petroleum import inflation also exceeded expectations at 0.4% (0.2% consensus, 0.1% prior unrev).
• Industrial production picked up strongly in February after a softer January, as a jump in manufacturing activity offset weaker utilities production.
• The Mar'25 10Y currently trades 110-24.5 (+5) vs. 110-14 low/110-29 high - still inside initial technical levels: resistance above at 111-25 (Mar 11 high), support below at 110-12.5/110-00 (Low Mar 6 & 13 / High Feb 7). Tsy 10Y yield 4.2793% last, curves off yesterday's lows: 2s10s -1.092 at 23.929, 5s30s +0.495 at 50.597.
• Focus turns to Wednesday's FOMC policy annc. Projected rate cuts through mid-2025 steady to softer vs. morning levels (*) as follows: Mar'25 steady at -.2bp, May'25 at -5.4bp ( -6bp), Jun'25 at -18.2bp (-19.7bp), Jul'25 at -26.7bp (-28.7bp).

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
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SOFR Benchmark Settlements:

• 1M +0.00259 to 4.31937 (+0.00297/wk)
• 3M +0.00940 to 4.30469 (+0.00964/wk)
• 6M +0.01746 to 4.21726 (+0.01889/wk)
• 12M +0.03422 to 4.06520 (+0.04736/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.32% (+0.02), volume: $2.473T
• Broad General Collateral Rate (BGCR): 4.31% (+0.02), volume: $977B
• Tri-Party General Collateral Rate (TCR): 4.31% (+0.02), volume: $952B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $106B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $279B

FED Reverse Repo Operation

RRP usage rebounds to $149.503B this afternoon from $89.496B Monday. Compares to $58.770B (lowest level since mid-April 2021) on February 14. The number of counterparties at 39 from 25 prior.

US SOFR/TREASURY OPTION SUMMARY

SOFR & Treasury option flow looks mixed by Tuesday's close, chunky vol buying in Tsy 10s ahead of Wednesday's FOMC policy annc. April Tsy options expire Friday. Underlying futures firmer after the bell, off late highs, curves flatter/off earlier highs. Projected rate cuts through mid-2025 steady to softer vs. morning levels (*) as follows: Mar'25 steady at -.2bp, May'25 at -5.4bp ( -6bp), Jun'25 at -18.2bp (-19.7bp), Jul'25 at -26.7bp (-28.7bp).

SOFR Options:
+5,000 SFRJ5 95.87/96.00/96.25 broken call flys 1.0 ref 95.87
-5,000 SFRM5 95.68/95.81 put spds, 5.75 ref 95.87
-4,000 0QM5 97.00/97.50 call spds w/ 0QU5 96.50/97.00 call spd strip, 18.0 total
-5,000 0QJ5/2QJ5 9625 put spds, 1.5 Green Apr over
-3,000 SFRH6 95.75/96.00/96.50/96.75 Iron Condor 16.25 ref 96.325
+5,000 SFRM5 96.18/96.31/96.43/95.62 call condors, 0.5 ref 95.875
+10,000 SFRJ5 95.68 puts, 0.5 ref 95.855/0.04%
-3,000 SFRU5 96.00 puts, 15.5 vs. 96.08/0.42%
2,000 96.12/96.50/96.87 call flys
4,000 SFRU5 96.43 calls ref 96.095
1,730 SFRU5 SFRU5 95.81/95.93 put spds vs. 96.43/96.75 call spds ref 96.095
4,000 0QH6 97.00/97.50/98.00/98.50 call condors ref 96.385
3,000 SFRM5 95.62/95.75/95.81/95.87 broken put condors

Treasury Options: (April options expire Friday)
4,000 TYJ5/TYK5 112 call spds, 23 ref 110-20
5,000 TYJ5 109 puts ref 110-21.5
Block, +15,000 TYM5 107.5/113.5 strangles, 35 vs. 110-18.5/0.05%
+9,000 TYM5 108/113 strangles, 45 vs. 110-19/0.05%
+5,000 TYK5 112 calls, 25 vs. 110-18/0.28%
10,000 TYJ5 109 puts ref 110-19
7,000 TYK5 109/111 3x2 put spds ref 110-18 to -18.5
over 5,100 TYJ5 111 calls, 11 last (2k vs Wed/wkly 10Y 111 calls)
over 2,000 TYJ5 111.25/Wed/wkly 111.25 call spds call spd
1,000 Wed/wkly 10Y 111/111.25/111.5 call flys ref 110-20.5

MNI BONDS: EGBs-GILTS CASH CLOSE: German Twist Steepening As Fiscal Reform Confirmed

European curves steepened Tuesday, with short-end German instruments outperforming.

• Core FI fell to the session's weakest levels in morning trade as the two day rally in equities appeared to extend into a third.
• But the equity rally faded in the afternoon, with oil prices also fading, helping core FI fully recover (though also reversing earlier periphery / semi-core EGB spread tightening).
• The Bundestag approved the much anticipated German fiscal reforms including a loosening of the debt brake, though this appeared to have been well-anticipated as Bunds saw only limited and temporary weakness following the news.
• Comments by ECB's Rehn in an MNI Connect event suggested that there is a high bar to him not voting for a cut in April (markets still have it better than 50/50 implied). In data, the Eurozone trade surplus was slightly larger than expected in January, while German ZEW jumped to the highest in 3 years (corresponding to the DAX equity rally and above fiscal developments).
• The German curve twist steepened on the day, with yields down through the 10Y segment, while the UK's bear flattened through the 10Y segment (though 2s30s was higher). Periphery/semi-core spreads closed a little wider.
• We get final February Eurozone inflation data Wednesday, but the week's main events in Europe are in the UK Thursday with labour market data and the BoE decision.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.3bps at 2.176%, 5-Yr is down 1.2bps at 2.46%, 10-Yr is down 0.8bps at 2.81%, and 30-Yr is up 0.5bps at 3.121%.
• UK: The 2-Yr yield is up 0.8bps at 4.201%, 5-Yr is up 0.7bps at 4.295%, 10-Yr is up 0.5bps at 4.643%, and 30-Yr is up 1.1bps at 5.229%.
• Italian BTP spread up 0.8bps at 110.8bps / French OAT up 0.9bps at 68.3bps  

MNI FOREX: EURUSD Optimism Prevailing, USDCHF Slides 0.5%

• The Euro was a beneficiary on Monday as Germany's parliament approved plans for a massive spending surge, diverging from prior fiscal conservatism in an attempt to revive economic growth and scale up defence spending. EURUSD trades in close proximity of recovery highs, currently located at 1.0955.
• Spot rising above the bull trigger at 1.0947 strengthens the current uptrend and signals scope for a move towards pivot resistance at 1.10 and a more notable cluster of medium-term resistance around the 1.12 mark.
• Tuesday’s session was categorised by a swift reversal lower for the major US equity benchmarks, which prompted Aussie to be among the weakest in G10, allowing AUDUSD to erase around half of yesterday’s strong rally. Key resistance at 0.6409, the Feb 21 high, continues to cap the topside. Clearance of this hurdle would strengthen a bull cycle and confirm a resumption of the uptrend that started Feb 3.
• Weaker risk sentiment knocked Cross/JPY off the overnight highs, however, USDJPY trades close to unchanged as we approach the APAC crossover. It is worth noting we have the Bank of Japan tomorrow and so positioning dynamics may have affected price action today. In contrast, and with the SNB decision not until Thursday, the Swiss Franc is the strongest of the major currencies. USDCHF is 0.5% lower on the session, and will focus on 0.8736, the December lows. To highlight USDCHF’s vulnerability to a further correction lower, we would highlight that the pair remains 1.65% above the Nov 06 US election lows, located at 0.8620.
• The Bank of Japan kicks off a busy economic calendar on Wednesday, which culminates with the March Fed decision and release of its summary of economic projections. Final February Eurozone inflation readings and its additional details are also scheduled on Wednesday.

MNI FX OPTIONS: Expiries for Mar18 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0745-55(E2.3bln), $1.0900-10(E678mln)
• USD/JPY: Y147.00($1.3bln), Y148.50($1.4bln), Y149.00($1.2bln), Y150.00($1.5bln)
• AUD/USD: $0.6320-30($1.5bln)
• USD/CNY: Cny7.2900($890mln)

MNI US STOCKS: Late Equities Roundup: Weaker but Off Lows, Media, Cruise Lines Lag

• Stocks remain weaker late Tuesday - off lows after reversing Monday's bounce of six month lows. Currently, the DJIA trades down down 256.49 points (-0.61%) at 41586.23, S&P E-Minis down 59.75 points (-1.04%) at 5672.75, Nasdaq down 260 points (-1.5%) at 17548.92.
• Communication Services and Consumer Discretionary sectors continued to underperform in late trade, interactive media and entertainment stocks weighing on the former: Meta Platforms -3.65%, Alphabet -2.68%, Live Nation Entertainment -1.85% and Netflix -1.75%
• The Discretional sector weighed on by Tesla -5.14% and cruise lines: Royal Caribbean Cruises -5.72%, Norwegian Cruise Line Holdings -4.67% and Carnival -3.66%.
• On the positive side, Health Care and Energy sectors outperformed in late trade, services buoyed the former: Humana Inc +2.24%, CVS Health Corp +1.83%, Becton Dickinson & Co +1.67%, Elevance Health +1.67%. Meanwhile, oil and gas stocks supported the Energy sector: Coterra Energy +2.02%, EQT +1.99%, Hess +0.97% and Chevron +0.79%.

MNI EQUITY TECHS: E-MINI S&P: (M5) Unwinding An Oversold Condition

• RES 4: 5967.23 50-day EMA  
• RES 3: 5864.25 Low Jan 13 and a recent breakout level 
• RES 2: 5847.41 20-day EMA
• RES 1: 5759.75 High Mar 17                  
• PRICE: 5718.00 @ 07:22 GMT Mar 18 
• SUP 1: 5559.75 Low Mar 13 and the bear trigger                 
• SUP 2: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
• SUP 3: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
• SUP 4: 5341.87 2.382 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing          

The trend condition in S&P E-Minis remains bearish and fresh cycle lows last  week reinforced current conditions. Moving average studies are in a bear-mode set-up highlighting a dominant downtrend. Sights are on 5483.50, a Fibonacci projection. Note that the short-term trend condition is oversold. Recent gains are considered corrective and the bounce is allowing this set-up to unwind. Firm resistance to watch is 5967.23, the 50-day EMA.

MNI COMMODITIES: Crude Reverses Gains, Gold Hits Fresh All-Time High

• Crude has reversed earlier gains as greater optimism towards a ceasefire in Ukraine offset concerns for wider escalation in the Middle East.
• WTI Apr 25 is down by 1.0% at $66.9/bbl.
• The White House and Kremlin have released readouts of the recently concluded call between President Putin and President Trump, with both noting that Moscow agreed to the implementation of a 30-day energy and infrastructure ceasefire.
• A bearish condition in WTI futures remains intact, with initial support at $65.22, the Mar 5 low, followed by $63.61, the Oct 10 ‘24 low.
• Meanwhile, spot gold has risen to a fresh all-time high today, with the yellow metal currently up by 1.2% at $3,036/oz.
• The move comes amid increased geopolitical tensions in the middle east as Israel launched airstrikes in Gaza today after Hamas failed to release the remaining hostages.
• A clear uptrend in gold remains intact, and this week’s resumption of the bull cycle reinforces current conditions. Sights are on $3,056.84 next, a Fibonacci projection.
• Copper has also extended gains, with price piercing the $500 level for the first time since May last year. Copper futures are currently up by 1.0% at $501/lb.
• A bull cycle in copper futures remains in play, with next resistance at $503.59, a Fibonacci projection, followed by $514.40, the 2.00 projection of the Jan 2 - 17 - Feb 3 price swing.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
19/03/2025	1000/1100	***	EU	HICP (f)
19/03/2025	1100/0700	**	US	MBA Weekly Applications Index
19/03/2025	1200/1300		EU	ECB de Guindos In Madrid
19/03/2025	1300/1400		EU	ECB Elderson At European Financials Conference
19/03/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
19/03/2025	1800/1400	***	US	FOMC Statement
19/03/2025	2000/1600	**	US	TICS
20/03/2025	2145/1045	***	NZ	GDP
20/03/2025	-		CH	Swiss National Bank Meeting
20/03/2025	0030/1130	***	AU	Labor Force Survey