STIR: OI Points To Mix Of Long Setting & Short Cover Dominating In SOFR Following JOLTs

Jun-05 09:57

Yesterday’s twist flattening of the SOFR futures strip and preliminary OI data point to the following net positioning swings on Tuesday:

Whites: A mix of long cover, long setting and short cover.
Reds: A mix of long setting and short cover, with the former dominating in net pack OI terms.
Greens: A mix of long setting and short cover, with the latter dominating in net pack OI terms.
Blues: A mix of long setting and short cover, with the latter dominating in net pack OI terms.
FOMC-dated OIS saw a dovish move on yesterday’s JOLTS data, leaving ~45bp of cuts priced through year end as the move away from the recent hawkish extremes extended a little.
The first 25bp cut is discounted through the end of Nov FOMC, with ~75% odds of a cut through the Sep meeting currently discounted.
Note that BBG’s U.S. economic surprise index has moved to fresh multi-year lows, with stagflation-lite discussions becoming more frequent.
The impending run of U.S. ISM services, ADP and NFP data will be key for Fed pricing during the remainder of the week.

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May-06 09:50

Following an expectedly subdued start to the session (both the UK and Japan enjoy a public holiday), GBP/USD has crept higher into the NY crossover, aiding GBP to be the strongest performing currency in G10. Market moves are inconsequential, however, with very few levels being tested on either the upside, or downside.
JPY is offered, aiding USD/JPY back toward the Y154.00 handle, at which over $1.0bln in option notional is set to roll-off at today's cut. The pair has rallied well off the 50-dma - a key support tested last week at 151.99, which should be of market focus on any renewed sell-off.
AUD trades well, in sympathy with Chinese equity markets. Both the Shanghai Composite and CSI-300 returned gains on the resumption of trade, with China's President kicking off a visit to France, Serbia and Hungary this week. The Chinese leader is expected to detail several substantial investment plans across the continent, however these are expected to favour the more politically amiable states, with Hungary a focus.
Focus for the duration of the Monday session turns to US hours, with the Senior Loan Officer Survey due as well as appearances from Simkus, Villeroy, Vujcic, Muller, Vasle, Nagel, Panetta of the ECB, as well as Fed's Barkin and Williams.

May-06 09:49

In the equity space, the short-term trend condition in S&P E-Minis remains bearish and recent gains appear to be a correction. A resumption of the bear leg would open 4907.57, 50.0% of the Oct 27 ‘23 - Apr 1 bull leg. The 20-day EMA, at 5124.14, has been pierced. A clear breach of this average and a continuation higher would instead signal a possible reversal and expose key resistance at 5333.50, Apr 1 high. Initial resistance to watch is 5192.16, 61.8% retracement of the Apr 1 - 19 bear leg.
EUROSTOXX 50 futures continue to trade above 4762.00, the Apr 19 low. On the upside, the contract recently traded through the 20-day EMA and resistance at 4990.00, the Apr 15 high. This highlights a potentially stronger reversal. An extension higher would expose the bull trigger at 5079.00, the Apr 2 high. Key support lies at 4762.00, a break would be bearish. Initial support to watch is 4878.60, the 50-day EMA.

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