What to watch
The overnight session was relatively subdued compared to the big swings we saw in markets through the European session yesterday. Core fixed income and the dollar have both drifted a little lower but remain well within yesterday's ranges.
- It's another relatively light calendar for today with the Fed's Williams and Harker the headline speakers and US Conference Board consumer confidence and JOLTS the highlights on the data calendar.
- Instead, the market will continue to try and find an equilibrium amid some early quarter end rebalancing flows and take some cues from equity and commodity markets.
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US TSYS: Late Friday Roundup: Geopol Risks Reassessed
Distinction between calm or exhausted markets was hard to tell Friday, the second day after Russia invasion of Ukraine. Treasuries traded modestly weaker on an inside range as equities enjoyed strong gains in late trade - both a continuation from late Thursday trade as markets reassessed geopol-risk of the Ukraine invasion as well as the costs of punitive sanctions on Russia.
- Amid myriad sanctions against Russian banks, wealthy individuals (including Pres Putin and foreign minister Lavrov) is the ongoing debate over whether Russian would be banned from the SWIFT banking system. After some initial pushback on the matter, Italian officials said there was no veto on the ban while Germany said the ban would be "manageable".
- Despite the bounce back to early Monday level (ESH2 at 4378.75, +94.75 late Fri) E-Mini S&P technical conditions are bearish however price remains above Thursday’s 4101.75 low and a corrective bounce extended Friday.
- Heavy session volumes in Tsy futures largely tied to final rolling from March to June futures that take lead on Monday. TYM2 traded 126-11 after the bell, -2.
- Lead Eurodollar quarterly EDH2 traded weaker even before latest 3M LIBOR set' gain of +0.01514 to 0.52300% -- new high last seen around early May 2020 after benchmark climbs +0.4343 total for the week. Chances of 50bp liftoff n March back around 50% with EDH2 at 99.325, -0.0575 after the bell.
- Later next week: Fed Chair Powell will be giving the semi-annual monetary policy report testimony to the House Financial Services Committee on Weds March 2 and the Senate Banking Committee on Thu March 3 - 1000ET/1500GMT in each case.
JGB TECHS: (H2) Short-Term Gains Considered Corrective
- RES 3: 152.62 - High Jul 21 and the bull trigger
- RES 2: 152.26 - High Dec 06 and 21
- RES 1: 151.09 - High Jan 21
- PRICE: 150.22 @ 19:59 GMT Feb 25
- SUP 1: 149.80 - Low Feb 17
- SUP 2: 149.65 - 61.8% Fib 2015 - 2020 Rally
- SUP 3: 149.37 - 0.5% 10-dma envelope
The downtrend in JGBs remains intact and last week’s gains are considered corrective. Recent lows reinforce a bearish theme and saw former support at the mid-January lows give way, opening levels not seen since mid-2018. Prices showed below the 150.00 handle, signalling scope for losses toward the key Fib of 149.65. For markets to stabilize, prices need to regroup toward the 151 handle, and show above 151.09.
STIR FUTURES: Ending Week With 6 US Hikes Fully Priced For 2022
- Fed Fund futures are ending the week with 32bp for March 16, almost exactly where they were this time last week.
- Jun 15 cumulative hikes have crept up to +86bp (+2bp) whilst Dec 14 has switched back to fully pricing in 6 hikes in 2022 with +156bps (+9bps).
- Whilst not a majority of FOMC voters, Bullard, Waller, George and Bowman have all indicated varying degrees of openness to a 50bp hike depending on upcoming data (payrolls Mar 4, CPI Mar 10).
- Bullard and Waller, speaking since the Russian invasion, both call for 100bp over the next three meetings.
