MNI ASIA MARKETS ANALYSIS: Tariff Focus Eases Slightly

HIGHLIGHTS

• Treasuries see-sawed off early lows, finishing near late session highs as focus turned to Early Wednesday's ADP private employment data, Tsy quarterly refunding, S&P Global US Services PMI and ISM Services data.
• Treasury support surged after JOLTS data, job openings were lower than expected in Dec at 7.6m (cons 8.00m) after an upward revised 8.156m (initial 8.098m) in Nov.
• Concerns moderated over the Trump administration's trade policy, China tariff tit-for-tat notwithstanding. The deadline for setting 10% tariffs on China has passed and China has since announced targeted retaliatory measures of its own due to be effective Feb 10, leaving scope for negotiations.

MNI US TSYS: Yields Decline Ahead Midweek ADP, China Tariff Talk Ongoing

• Treasuries see-sawed off early session highs to finish near the top end of the session range Tuesday, concerns moderating over the Trump administration's trade policy, China tariff tit-for-tat notwithstanding.
• Treasury support surged after JOLTS data, job openings were lower than expected in Dec at 7.6m (cons 8.00m) after an upward revised 8.156m (initial 8.098m) in Nov.
• Focus turns to Wednesday morning's ADP private employment data ahead of Friday's headline NFP data for January, not to mention US Tsy quarterly refunding announcement, S&P Global US Services PMI and ISM Services data.
• After the bell, March'25 10Y futures trade 109-05.5 (+7) vs. 109-07.5 high, just off initial technical resistance at 109-10/15.5 (50-day EMA / High Feb 3). 10Y yield -.0404 at 4.5146%. Curves mildly mixed: 2s10s -.525 at 29.877, 5s30s +.327 at 43.155.
• Currency market volatility was relatively subdued on Tuesday, in contrast with the sharp swings seen throughout Monday’s session. However, the USD index spent the majority of the session on the backfoot, consistently edging lower and extending session declines from the overnight highs to around 1%.

SOFR FIXES AND PRIOR SESSION REFERENCE RATES
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SOFR Benchmark Settlements:

• 1M -0.00535 to 4.30733 (-0.00575/wk)
• 3M -0.00125 to 4.30188 (-0.00037/wk)
• 6M +0.01066 to 4.26173 (+0.01342/wk)
• 12M +0.02496 to 4.19270 (+0.03240/wk)

US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.35% (-0.03), volume: $2.413T
• Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $913B
• Tri-Party General Collateral Rate (TCR): 4.33% (-0.01), volume: $890B
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $94B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $264B

FED Reverse Repo Operation

RRP usage falls to new low of $85.654B this afternoon from $97.781B Friday. Today's usage compares to previous low of $92.863B on Monday, January 27 - the lowest level since mid-April 2021. The number of counterparties falls to 34 from 39 prior.

US SOFR/TREASURY OPTION SUMMARY

SOFR Option flow looked more pared in Tuesday's second half as trading accounts turned attention to Wednesday morning's ADP and Friday's headline employment data for January. Underlying futures have see-sawed moderately higher, at/near the top end of the session range. Projected rate cuts through mid-2025 gain slightly vs. this morning's levels (*) as follows: Mar'25 at -3.7bp (-3.5bp), May'25 at -11bp (-9.8bp), Jun'25 at -21.0bp (-19.5), Jul'25 at -26.9bp (-24.9bp).

SOFR Options:
+10,000 SFRJ5 95.75 puts 2.0 ref 95.89
+5,000 SFRU5 97.00/97.50 call spds, 2.0 vs. 95.99/0.06%
+10,000 0QU5 96.50/97.00 call spd vs 3QU5 96.37/96.87 call spd spd, 0.5 net
+5,000 SFRZ5 95.50 puts, 9.5 vs. 96.06/0.24%
-5,000 SFRZ5 95.37/96.62 strangle, 23.0 96.07
-10,000 SFRJ5 95.87/96.12/96.37 call flys, 4.0-3.75 ref 95.89
-15,000 0QK5 95.25/95.50 put spds, 2.5 ref 96.09
+5,000 SFRJ5 95.75 puts 2 ref 95.885
Update, over +30,000 SFRM5 95.81/95.93/96.00 broken call flys, 3.25 last ref 95.855
+15,000 SFRZ5 97.00 0QZ5 97.50 call spds 3.5 steepener
-4,000 SFRM5 95.75/95.87 put spds 2.75 over SFRJ5 95.68/95.81 put spds
+2,500 SFRZ5 95.50 puts, 10.5 vs. 96.015/0.24%
-2,500 SFRZ5 96.00/96.50/97.00 call fly w/ 95.00/95.50/96.00/96.60 put condor, 35.25 total ref 96.02
+2,000 0QG5 96.00/3QG5 95.87 put spds, 0.0 flattener
+10,000 SFRH5 96.25 calls vs -5,000 SFRK5 97.00 calls, 0.25 net
3,800 0QH5 95.75/95.87/96.00 put trees ref 96.06
4,000 SFRM5 96.00/96.12/96.25 call flys ref 95.87 to -.875
over +25,000 SFRJ5 95.62/95.68/95.75 put flys, 1.25
5,000 SFRJ5 95.68/95.75/95.81/95.87 put condors
2,000 SFRZ5 96.50/96.75/97.00/97.25 call condors ref 96.035

Treasury Options:
-10,000 TYH5 108.75 straddles, 115-114
+5,000 USH5 110 puts, 9
+9,000 wk1 US 115 calls, 3
over 14,000 TYH5 107 puts, 7 last 
2,000 TYH 107.5/108 put spds 
over 10,200 TYH5 108 puts, 19 last
over 13,000 USH5 110 puts, 9-11 ref 113-23
over 7,400 USH5 112 puts, 31-32
1,500 TYH5 110.5/111.5 call spds ref 108-25
2,100 FVH5 105/106 put spds ref 106-11.25
2,000 wk2 US 111/112 put spds ref 114-01 (exp Feb 14)

MNI BONDS: EGBs-GILTS CASH CLOSE: Modest Yield Rise On US Tariff Relief

European yields rose modestly Tuesday, with Bunds slightly outperforming Gilts.

• After some initial risk-on pressure stemming from the US's delay imposing tariffs on Canada and Mexico, core EGBs/Gilts saw an afternoon bid as US job openings data were weaker than expected.
• MNI published a sources story noting that the ECB is likely to adjust its reference to policy restrictiveness in its next statement in March, but there would be resistance on the Governing Council to completely removing it (link). And on the US tariffs front, MNI reported that while the EU is likely to seek to deescalate any trade dispute with the U.S. via negotiation, it may also look to increase non-tariff barriers (link).
• Limited data included French budget balance (2024 deficit slightly smaller than foreseen in November's draft finance bill); Spain saw a smaller rise in January unemployment than expected.
• The German curve lightly bear flattened, with the UK's bear steepening.
• Periphery EGB spreads tightened marginally, led by BTPs. French OAT spreads were flat ahead of Wednesday's censure votes on the Bayrou government.
• Wednesday's schedule includes final Services/Composite PMIs (including the first and final readings for Italy and Spain) and Eurozone PPI, while ECB's Lane makes an appearance. Attention turns to the Bank of England decision Thursday - MNI's preview is here (PDF).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.7bps at 2.051%, 5-Yr is up 1.5bps at 2.17%, 10-Yr is up 1.1bps at 2.396%, and 30-Yr is up 0.7bps at 2.646%.
• UK: The 2-Yr yield is up 1.6bps at 4.181%, 5-Yr is up 2.7bps at 4.188%, 10-Yr is up 3.5bps at 4.522%, and 30-Yr is up 3.5bps at 5.125%.
• Italian BTP spread down 1.7bps at 110bps / French OAT down 0.2bps at 72bps   

MNI EGB OPTIONS: More Limited Rates Trade After Prior Week's Flurry

Tuesday's Europe rates/bond options flow included:

• OEH5 118.25c, sold at 15.5 down to 14.5 in 14k
• ERM5 97.50 put, paper pays 1.25 on 16k
• SFIK5 95.75/95.90/96.05/96.20 call condor bought for 7-7.25 in 10k
• SFIM5 95.85/95.65ps 1x2 with SFIU5 96.00/95.70ps 1x2, bought the strip for 5.25 in 2.5k.

MNI FOREX: USD Index Edges Further South, Now Lower on Week

• Currency market volatility was relatively subdued on Tuesday, in contrast with the sharp swings seen throughout Monday’s session. However, the USD index spent the majority of the session on the backfoot, consistently edging lower and extending session declines from the overnight highs to around 1%.
• Despite the significant greenback surge to start the week, the DXY is now lower on the week with multiple factors weighing throughout the session. Primarily, broader optimism surrounding trade/tariff negotiations has boosted equities, supporting risk sensitive currencies in tandem. Secondly, Trump's hardline approach on Iran has assisted the push lower in the front-end of the US yield curve and, in turn, has pressured the greenback.
• Aside from Scandies which lead G10 FX gains, the Canadian dollar and the Swiss Franc also moderately outperform. Broad dollar weakness however keeps the likes of EUR, AUD and CNH all on the front foot, registering  gains of around 0.3% on the session.
• For now, EURUSD gains are considered corrective, however the powerful recovery from yesterday’s cycle lows has seen the pair breach initial resistance at 1.0350, the Jan 31 low and Monday’s high. A stronger recovery would place the focus on 1.0446, the 50-day EMA and then 1.0533, the Jan 27 high and a key resistance.
• There was also a notable turnaround for USDJPY, which after printing a 155.52 high, traded as low as 154.26, keeping a developing bear threat for the pair in play and focus on a cluster of daily lows just below the 154.00 handle.
• New Zealand unemployment headlines the APAC docket on Wednesday, before the focus turns to US ADP employment and ISM Services PMI. 

MNI FX OPTIONS: Expiries for Feb05 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0300-05(E1.4bln), $1.0315-35(E1.8bln), $1.0400(E570mln), $1.0500(E1.4bln)
• USD/JPY: Y153.15-25($2.0bln)
• USD/CAD: C$1.4240($954mln), C$1.4500($710mln), C$1.4530($847mln), C$1.4600($1.5bln)

MNI US STOCKS: Late Equities Roundup: Holding Gains, Energy & Chips Stocks Leading

• Stocks continue to extend late session highs as concerns moderate over the Trump administration's trade policy, China tariff tit-for-tat notwithstanding. Currently, the DJIA trades up 153.9 points (0.35%) at 44573.8, S&P E-Minis up 41.5 points (0.69%) at 6063.75, Nasdaq up 241.9 points (1.2%) at 19633.39.
• Energy and Information Technology sectors continued to lead gainers in late trade, oil and gas stocks supporting the former: Marathon Petroleum gaining 6.75% after beating earnings estimates while lowering capacity to 85% to improve margins. Meanwhile, Valero +4.66%, APA Corp +4.47% and Phillips 66 +4.02%.
• After trading weaker the last few sessions, the Information Technology sector gained on support from semiconductor makers: Monolithic Power +4.13%, Advanced Micro Devices +3.96%, Enphase +3.93% and Nvidia +2.06%. Of note, software solutions heavyweight Palantir surged 22.63% on strong earnings and guidance.
• On the flipside, Utilities and Consumer Staples sectors continued to underperform in the second half, multi energy producers weighing on the former: Dominion Energy -4.21%, Edison Int -1.3% and NextEra Energy -1.25%. On Consumer Staples, Estee Lauder fell nearly 17% after announcing 7,000 job cuts and to book charges of $1.2 billion to $1.6 billion before tax. Elsewhere, Clorox declined 6.78%, PepsiCo -4.67% and Archer-Daniels-Midland -3.44%.
• Additional earnings announcements expected after the close: Snap, Alphabet Inc, Match Group, Amgen, Advanced Micro Devices, Lumen Technologies, Simon Property Group, Enphase Energy, Electronic Arts, Omnicom Group and Juniper Networks Inc.

MNI EQUITY TECHS: E-MINI S&P: (H5) Bear Threat Remains Present 

• RES 4: 6178.75 High Dec 6 and key resistance  
• RES 3: 6162.25 High Jan 24
• RES 2: 6147.75 High Jan 31
• RES 1: 6069.00 High Feb 3              
• PRICE: 6060.00 @ 1500 ET Feb 4
• SUP 1: 5935.50 Low Feb 3         
• SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
• SUP 3: 5842.50 Low Jan 14
• SUP 4: 5809.00 Low Jan 13 and a key resistance 

The S&P E-Minis contract started the week on a bearish note. The gap lower Monday and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, a Fibonacci retracement point. Initial resistance is at 6069.00, today’s intraday high. Gains are considered corrective, however, a stronger rally would expose key resistance at 6178.75, the Dec 6 high.

MNI COMMODITIES: Another Record High For Gold, WTI Erases Losses

• Gold hit a fresh record high on Tuesday, aided by continued safe haven demand amid the ongoing tariff uncertainty and a weaker US dollar.
• Spot gold is currently 1.0% higher on the session at $2,844/oz, taking total gains this year to over 9%.
• The move comes amid a further escalation of trade tensions between the US and China. In addition, President Trump's hardline approach on Iran has assisted the push lower in the front-end of the US yield curve, pressuring the greenback.
• For gold, next immediate resistance is seen at $2,845.2, a Fibonacci projection, which has been tested today. This is followed by $2,867.5, the 1.50 projection of the Nov 14 - Dec 12 - 19 price swing.
• There have also been some spillovers into silver, which has risen by 1.9% to $32.2/oz.
• For silver, sights are on $32.338, the Dec 12 high and a key resistance. Clearance of this level would highlight a reversal, opening $33.125, the Nov 1 high.
• Meanwhile, WTI erased most of its earlier losses after the headlines that the Trump administration was seeking “maximum pressure” on Iran.
• WTI Mar 25 is down by 0.5% at $72.8/bbl.
• Earlier losses today saw WTI futures pierce support around the 50-day EMA, at $72.32. A clear break of the 50-day average would suggest scope for a deeper retracement towards next support at $68.05, the Dec 20 low.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
05/02/2025	0745/0845	*	FR	Industrial Production
05/02/2025	0815/0915	**	ES	S&P Global Services PMI (f)
05/02/2025	0815/0915	**	ES	S&P Global Composite PMI (final)
05/02/2025	0845/0945	**	IT	S&P Global Services PMI (f)
05/02/2025	0845/0945	**	IT	S&P Global Composite PMI (final)
05/02/2025	0850/0950	**	FR	S&P Global Services PMI (f)
05/02/2025	0850/0950	**	FR	S&P Global Composite PMI (final)
05/02/2025	0855/0955	**	DE	S&P Global Services PMI (f)
05/02/2025	0855/0955	**	DE	S&P Global Composite PMI (final)
05/02/2025	0900/1000	*	IT	Retail Sales
05/02/2025	0900/1000	**	EU	S&P Global Services PMI (f)
05/02/2025	0900/1000	**	EU	S&P Global Composite PMI (final)
05/02/2025	0930/0930	**	GB	S&P Global Services PMI (Final)
05/02/2025	0930/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
05/02/2025	1000/1100	**	EU	PPI
05/02/2025	1200/0700	**	US	MBA Weekly Applications Index
05/02/2025	1315/0815	***	US	ADP Employment Report
05/02/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
05/02/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
05/02/2025	1330/0830	**	US	Trade Balance
05/02/2025	1330/0830	***	US	Treasury Quarterly Refunding
05/02/2025	1400/1500		EU	ECB's Lane at Euro area in 2025 event and Q&A
05/02/2025	1400/0900		US	Richmond Fed's Tom Barkin
05/02/2025	1445/0945	***	US	S&P Global Services Index (final)
05/02/2025	1445/0945	***	US	S&P Global US Final Composite PMI
05/02/2025	1500/1000	***	US	ISM Non-Manufacturing Index
05/02/2025	1500/1000	**	US	housing vacancies
05/02/2025	1530/1030	**	US	DOE Weekly Crude Oil Stocks
05/02/2025	1800/1300		US	Chicago Fed's Austan Goolsbee
05/02/2025	2000/1500		US	Fed Governor Michelle Bowman
06/02/2025	0030/1130	**	AU	Trade Balance
05/02/2025	0030/1930		US	Fed Vice Chair Philip Jefferson