What to watch
May-02 06:08
- Liquidity is likely to be constrained today with the UK out for a bank holiday (UK markets are the only notable European markets that are closed). And we also have Chinese markets closed Mon-Wed, Hong Kong closed today, Singapore closed today/tomorrow and then Japan will be out Tues-Thurs.
- The main focus in the European morning session will be on the PMIs. Most notably, we will receive the first releases from Sweden, Spain, Italy and Norway as well as final releases from France, Germany and the Eurozone aggregate. We will also see the release of Eurozone confidence data (economic, industrial and services will all be first prints with consumer confidence the final print).
- In the US session we will receive the final print of the S&P PMI and construction data for March but the main highlight will be the release of ISM manufacturing data. The prices paid (and to a lesser extent employment) component will be closely watched in particular.
- Looking ahead, it's a big week for central banks with the DM highlights the RBA meeting overnight tonight, the FOMC meeting on Wednesday and the Norges Bank and BOE meetings, both on Thursday.
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US TSYS: Positive Start to New Quarter
Apr-01 20:13
New quarter underway with FI markets extending jobs-data lows, June 30Y bond futures through early Wed lows to 147-29 (-2-05), 30YY taps 2.5416 high before grinding higher around midmorning.
- Short end back to pricing in more aggressive/multiple 50bp rate hikes for year (216bp by year end vs. 220bp on Monday). Broad-based inversions vs. 10s: yield curves bear flattened -- 2s10s slipped to -8.135 low, 5s10s slips to -18.522 low.
- TYM2 currently at 122-07 (-21), above key resistance of 120-30+ Low Mar 28 and the bear trigger where a break would confirm a continuation of the downtrend and would open the 120-00 handle.
- Decent jobs data (431k vs. 490k est but Fed up-revision of 95k and unemployment rate drop to 3.6%) initially underpinned stocks with SPX eminis to 4502.0 second half low.
- Stock indexes traded mixed after the FI close, off midday lows to near middle of the session range. S&P eminis trading +4.75 at 4535.5, ESM2 well above key support of 4440.90 50-day EMA.
- Cross asset update, crude see-sawed in weaker territory (WTI -$0.88 (-0.88%) at $99.37; Gold -$14.34 (-0.74%) at $1923.42.
- Limited data next week, FOMC minutes release on Wednesday.
- The 2-Yr yield is up 12.2bps at 2.4564%, 5-Yr is up 10.7bps at 2.5671%, 10-Yr is up 5.5bps at 2.3932%, and 30-Yr is down 0.6bps at 2.4416%.
USDCAD TECHS: Path Of Least Resistance Remains Down
Apr-01 20:00
- RES 4: 1.2778 High Mar 16
- RES 3: 1.2699 High Mar 17
- RES 2: 1.2654 50-day EMA
- RES 1: 1.2593/2601 High Mar 28 / 20-day EMA
- PRICE: 1.2505 @ 16:34 GMT Apr 1
- SUP 1: 1.2430 Low Mar 30
- SUP 2: 1.2408 1.0% 10-dma envelope
- SUP 3: 1.2387 Low Nov 10 2021
- SUP 4: 1.2328 Low Oct 29 2021
USDCAD remains vulnerable. The pair traded through key support at 1.2451 Wednesday - the Jan 19 low. This has reinforced bearish conditions and extends the downtick triggered by the recent break of 1.2552, 76.4% of the Jan 19 - Feb 24 rally. The break lower opens 1.2387 initially ahead of 1.2328. On the upside, initial firm resistance is seen at 1.2601, the 20-day EMA. A break of this average would ease bearish pressure.
US TSYS: Eurodollar/Tsy Option Roundup
Apr-01 19:46
Robust volumes noted Friday, two-way on net as underlying rate futures traded weaker after the close -- but well off morning lows.
- Eurodollar options saw better volumes in 2- and 3Y midcurve puts as Reds through Greens (EDM3-EDH5) hammered -0.210-0.170 on the day as pricing of more aggressive rate hikes resume.
- Salient trade includes 12,000 short Apr 96.75/96.87 put spreads and 10,000 short May 97.25 puts vs. 5,000 97.50 puts. In 3Y midcurves, paper bought 5,000 Green Jun/Sep 94.50 put strip, 84.0 covered
- Treasury options saw better two-way call trade as underlying futures managed to bounce off early session lows (still weaker by the close amid broad-based yield curve inversions.
- Highlight trade included a buy of 25,000 TYK 122 calls, 49 vs. 121-25 followed by sale of -20,000 TYM 123 calls, 52 later in the session. Tsy 5Y call highlights included a scale buyer of over 42,000 FVK 114.5 calls, 20.5-23 and over 12,500 FVK 115.5 calls, 6.
