MNI ASIA MARKETS ANALYSIS: Tsys & US$ Retreat, Slight CPI Miss

HIGHLIGHTS

• Treasuries look to finish near session late Tuesday session lows, directional with the decline in the Greenback reversing most of the week opener's rally (Bbg US$ index -8.56 at 1231.47).
• Stocks were mostly higher, chip makers helped the S&P & Nasdaq rally to the best levels since late February-early March, while the Dow retreated - weighed by Health Care sector shares.
• Pres Trump tour of Saudi Arabia reportedly secured $600B investments to “strengthen our energy security, defense industry, technology leadership, and access to global infrastructure and critical minerals.”

MNI US TSYS: Rates Quickly Reject Early Highs After Slight CPI Miss

• Treasuries look to finish near late Tuesday session lows - holding a relatively narrow range through the second half. Tsys had extend highs after slighly lower than expected CPI inflation measures.
• There is little in this report alone to suggest a meaningful gap between CPI and PCE - in other words, the slight downside miss in core CPI doesn't carry a major re-interpretation for PCE via the components. Note April core PCE consensus was 0.24% M/M coming into today, and while this may dip slightly we doubt forecasts will be radically changed (core CPI came in at 0.22% M/M).
• As for broader trends, the core CPI six-month rate held at 3.0% annualized for a second month in April having moderated from 3.7% in January, although it’s still a fourth consecutive month above the Y/Y.
• Treasury Jun'25 10Y futures currently trades at 109-31.5 (-5.5) -- breaching support at 110-01+, a Fibonacci retracement point as well as yesterday’s low. Clearance here strengthens a bearish theme and exposes a key support at 109-08, the Apr 24 low.
• Curves bear steepened, 2s10s +1.515 at 46.949, 5s30s +1.966 at 81.118.
• The greenback has weakened on Tuesday, eroding a solid portion of the prior session advance. Amid the continued bid for major equity indices, the US dollar traded in a more typical manner with risk, weakening against most G10 peers and in particular against the likes of AUD and NZD.

REFERENCE RATES (PRIOR SESSION)
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US TSYS: Repo Reference Rates

• Secured Overnight Financing Rate (SOFR): 4.28% (+0.00), volume: $2.535T
• Broad General Collateral Rate (BGCR): 4.27% (+0.00), volume: $1.077T
• Tri-Party General Collateral Rate (TCR): 4.27% (+0.00), volume: $1.037T
• (rate, volume levels reflect prior session)

STIR: FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $105B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $296B

FED Reverse Repo Operation

RRP usage recedes to $144.214B this afternoon from $147.505B yesterday, total number of counterparties at 32. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.

US SOFR/TREASURY OPTION SUMMARY

SOFR & Treasury option volumes gradually improved, flow still mixed, however as underlying futures scaled off early morning highs, projected rate cut pricing holds steady to mildly softer vs. late Monday levels (*) as follows: Jun'25 steady at -2.1bp, Jul'25 steady at -9.8bp, Sep'25 -24.7bp (-26.8bp), Oct'25 -37.3bp (-40.3bp).

SOFR Options:
+5,000 0QU5 96.87/97.37/97.87 call flys, 6.0 vs. 96.59/0.10%
-12,500 SFRU6 96.87/SFRZ5 96.25 call spds, 13.0
+10,000 SFRU5 95.62/95.75/95.87 put flys, 3.0 ref 95.935
Update, screen/Block over +22,000 SFRU5 95.81/SFRZ5 95.75 put spds, 1.0-1.5 net
+10,000 0QN5 96.87/97.00 call spds, 3.0 ref 96.615
Block, 6,660 SFRU5 95.81/SFRZ5 95.75 put spds, 1.0 net
-4,000 SFRU5 96.00/96.25/96.50 call flys, 3.0 ref 95.965
+5,500 SFRU5/SFRZ5 98.00 call spds 1.75 net (Dec over)
Block, 5,000 SFRU5/SFRZ5 95.68/95.87 put spd spds, 3.0 net/Sep over  
Block, 5,000 0QM5 96.12/96.31 put spds, 3.5 ref 96.53
4,000 SFRN5 96.68/96.87 call spds ref 95.965
13,500 SFRM5 95.62 puts ref 95.70 to -.705
3,900 SFRM5 95.68/95.81/95.93 call flys ref 95.70
2,000 0QK5 96.81 puts ref 96.545
2,500 0QZ5 97.75/98.00/99.25/100.0 broken call condors ref 96.605
1,500 SFRZ5 96.75/97.00/97.12 broken call flys ref 96.225
5,000 SFRM5 95.75/95.87/96.00 call flys ref 95.705

Treasury Options:
-10,000 FVM5 107.75 puts, 28.5-28.0
6,100 TYM5 110 straddles, 56 ref 110-02
3,000 TYN5 107/109 put spds ref 110-04.5
+4,000 TYM5 109.75/110.5 strangles, 35 (5.91% iv)
-20,000 TYM5 109.5 puts, 10 
+6,900 TUU5 103 puts, 11.5-12
over 40,000 TYM5 108/109 put spds, 5 ref 110-06.5
Block, 20,000 TYN5 108/109 put spds 14 ref 110-09.5
Block/screen, 30,000 FVN5 106.5/107 put spds
over 13,800 FVM5 109 calls, 2.5 last
over 10,000 TYM5 109.5/111 strangles
2,000 TYM5 109/110 put spds, 19 ref 110-07
2,500 TUN5 103.75/104 call spds vs. 103.12 puts ref 103-20.12
2,000 TYM5 109.5/110/111 broken put flys ref 110-08.5

MNI BONDS: EGBs-GILTS CASH CLOSE: Selling Resumes, Shrugging Off Benign Data

Tuesday saw further weakness across European bonds, despite seemingly FI-benign data releases.

• Following Monday's sell-off following a de-escalation of the US-China trade war, European core FI remained on the back foot as a risk-on tone persisted in equities.
• Brisk supply on both the corporate and sovereign (Netherlands, Germany, Italy, EU) fronts in Europe weighed on the space.
• The Gilt front-end/belly outperformed, with the latest labour market report bringing a downside surprise on the wage front (and little in market-moving commentary by BOE's Pill). And in the most closely-watched release of the day globally, US CPI came in softer than expected.
• In the end, the data didn't hold sway, with cross-asset moves in a lower USD and higher equities after the US CPI release instead dragging Bunds and Gilts to/near session lows by the cash close.
• The German and UK curves both bear steepened, with the UK belly/short end outperforming overall as noted.
• Spreads tightened modestly on the EGB periphery/semi-core, with BTPs leading gains.
• Wednesday's calendar includes some final April HICP readings, while we also get multiple ECB speakers including Villeroy and Holzmann.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.3bps at 1.936%, 5-Yr is up 2.3bps at 2.245%, 10-Yr is up 3.2bps at 2.68%, and 30-Yr is up 4.5bps at 3.126%.
• UK: The 2-Yr yield is down 2bps at 3.98%, 5-Yr is up 0.5bps at 4.131%, 10-Yr is up 2.7bps at 4.67%, and 30-Yr is up 3.6bps at 5.427%.
• Italian BTP spread down 1.1bps at 101.8bps / Spanish down 0.7bps at 61.9bps  

MNI EGB OPTIONS: Euribor. Sonia Call Structures Prevalent Tuesday

Tuesday's Europe rates/bond options flow included: 

• ERN5 98.18/98.37/98.50 broken c fly, sold at 3 in 3k
• ERU5 98.50/98.75cs, bought for 1 in 7k
• ERU5 97.87/98.00cs, sold at 9.5 in 10k
• ERU5 98.37/98.50/98.62c fly, bought for 1 and 1.25 in 8k
• ERZ5 98.37/98.50cs, bought for 2.5 in 17.5k (ref 98.18, 8% del)
• SFIZ5 96.40/96.80 call spread vs. 96.00 puts paper paid 2 on 5K, buying the call spread

FOREX: AUDUSD Surges Amid Equity Rally/Soft US CPI

• Following the softer-than-expected US CPI, the greenback has weakened on Tuesday, eroding a solid portion of the prior session advance. Amid the continued bid for major equity indices, the US dollar traded in a more typical manner with risk, weakening against most G10 peers and in particular against the likes of AUD and NZD.
• NZDUSD (+1.4%) has risen back above a short-term pivot at 0.5900, and trades within close proximity of Monday’s highs at 0.5941. The pair has made multiple attempts above the 0.60 handle in recent weeks, but has failed to breach the US election related highs at 0.6038. This will remain a key barrier to a more protracted recovery.
• For AUDUSD (+1.60%), Monday’s move down is considered corrective and spot currently stands at the best levels of the week. This keeps trend conditions firmly in bullish territory, and further strength would open 0.6528, the Nov 29 ‘24 high.
• The likes of EURUSD and GBPUSD are also notably higher, though gains are just under the 1% mark. From a trend perspective, recent EURUSD weakness appears corrective as key signals remain bullish. The 50-day EMA has been pierced but today’s reversal higher keeps this support level intact. A resumption of strength would place the topside focus on 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction. Various sell-side analysts had flagged that levels between 1.10/11 should offer an attractive entry point for dip buyers.
• The risk-on theme sees the Japanese yen underperform, with USDJPY only half a percent lower today, holding on to the bulk of the surge through the 50-day EMA on Monday, as easing trade tensions between the US & China spur renewed optimism for the pair.
• Australia Wage Price Index data and China new loans figures will be highlights on the Wednesday calendar, before the focus turns to Thursday’s release of US retail sales and PPI.  

MNI OPTIONS: Expiries for May14 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1150-65(E1.3bln), $1.1175($969mln), $1.1200(E835mln), $1.1390-10(E1.9bln)
• AUD/USD: $0.6475(A$574mln), $0.6500(A$591mln)
• NZD/USD: $0.5855-75(N$757mln)
• USD/CAD: C$1.4000($543mln)
• USD/CNY: Cny7.2000($658mln)

MNI US STOCKS: Late Equities Roundup: Health Care Stocks Weigh Heavily on the Dow

• Stocks remained mixed late Tuesday, weaker DJIA vs. continued gains in SPX eminis and Nasdaq indexes. Currently, the DJIA trades down 203.9 points (-0.48%) at 42207.72, S&P E-Minis up 48.75 points (0.83%) at 5914, Nasdaq up 315.1 points (1.7%) at 19023.13.
• Information Technology and Communication Services sectors continued to underpin the tech heavy Nasdaq and SPX eminis in late trade while health care and pharmaceutical stocks weighed heavily on the Dow after UnitedHealth announced it's CEO stepped down in addition to suspending its 2025 guidance, UNH shares falling over 15.75% earlier.
• As noted, health care stocks underperformed in late trade: UnitedHealth -16.44%, Elevance Health -8.28%, Humana -7.06%, CVS Health -5.22% and Molina Healthcare -4.14%. Meanwhile, the Consumer Staples sector was weighed by Hershey -2.40%, Kimberly-Clark -2.30%, Kroger -2.10%, Costco -1.88% and Target -1.82%.
• On the positive side chip stocks soared after the Trump administration said it was "considering a deal to allow the UAE to import over 1 million advanced Nvidia chips, exceeding limits under Biden-era AI chip regulations" Bbg reported. Leading gainers included: First Solar +20.41%, Super Micro Computer +15.48%, Palantir Technologies +8.80%, NVIDIA +5.74%, Western Digital +5.39%, Micron Technology +5.06% and Broadcom +4.47%.
• Oil and gas stocks supported the Energy sector as crude prices gained (WTI +1.75 at 63.70) after Pres Trump’s remarks in Riyadh that the US would drive Iranian oil exports to zero if they can’t come to an agreement. Leading gainers included Phillips 66 +5.79%, Valero Energy +4.25%, APA +4.04%, Targa Resources +3.67% and Marathon Petroleum +3.31%.

MNI EQUITY TECHS: E-MINI S&P: (M5) Northbound 

• RES 4: 6925.00 High Feb 19
• RES 3: 6000.00 Round number resistance
• RES 2: 5938.25 High Mar 4
• RES 1: 5927.00 Intraday high                                
• PRICE: 5912.00 @ 1445 ET May 13
• SUP 1: 5637.82/ 5599.73 50- and 20-day EMA values                       
• SUP 2: 5455.50 Low Apr 30
• SUP 3: 5355.25 Low Apr 24
• SUP 4: 5127.25 Low Apr 21 and a key support 

A bullish trend condition in S&P E-Minis remains intact and Monday’s strong gains reinforce bullish conditions. The contract has pierced an important resistance at 5837.25, the Mar 25 high and a bull trigger. This strengthens the bullish theme, paving the way for a continuation near-term. Sights are on 5896.25, a Fibonacci retracement. Initial firm support to watch lies at 5637.82, the 50-day EMA.

MNI COMMODITIES: Crude Rallies Amid Sanctions Threat, Metals Buoyed By Weak Dollar

• Crude has climbed to its highest level since April 22, supported by further US threats against Iran’s energy industry. Earlier support came from optimism on trade war de-escalation.
• WTI Jun 25 is up by 2.9% at $63.7/bbl.
• The US State Department announced further sanctions targeting Iran’s oil trade, days after Iran and the US concluded a fourth round of nuclear talks in Iran.
• Today’s move has pierced key resistance at $63.56, the 50-day EMA. A clear break of this level would highlight a stronger reversal, opening $66.41, the Apr 4 high.
• Meanwhile, spot gold has edged up by 0.3% to $3,247/oz, aided by the weaker dollar, following softer-than-expected US CPI data.
• In the very short-term, analysts at Saxo Bank say that gold will trade in a consolidation mode due to the major de-escalation in trade tensions between the US and China.
• Key short-term support to watch is $3,202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3,164.3, 61.8% of the Apr 7 - Apr 22 upleg.
• Elsewhere, copper has rallied by 2.1% to $472/lb, buoyed by the weakness in the dollar.
• Key short-term resistance has been defined at $498.25, the Apr 23 high. A break of this is required to reinstate a bullish theme.
• A resumption of weakness would expose $436.00, the Apr 10 low, ahead of $407.40, the Apr 7 low and key support.

WEDNESDAY DATA CALENDAR

Date	GMT/Local	Impact	Country	Event
14/05/2025	0600/0800	***	SE	Final Inflation Report
14/05/2025	0600/0800	***	DE	HICP (f)
14/05/2025	0700/0900	***	ES	HICP (f)
14/05/2025	0715/0815		GB	BOE Breeden At ISDA Conference
14/05/2025	0900/1000	**	GB	Gilt Outright Auction Result
14/05/2025	0915/0515		US	Fed Governor Christopher Waller
14/05/2025	1100/0700	**	US	MBA Weekly Applications Index
14/05/2025	-	***	CN	Money Supply
14/05/2025	-	***	CN	New Loans
14/05/2025	-	***	CN	Social Financing
14/05/2025	1230/0830	*	CA	Building Permits
14/05/2025	1240/1440		EU	ECB's Cipollone On Liquidity Issues Panel
14/05/2025	1310/0910		US	Fed Vice Chair Philip Jefferson
14/05/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
14/05/2025	2140/1740		US	San Francisco Fed's Mary Daly
15/05/2025	0130/1130	***	AU	Labor Force Survey