Credit Agricole

Asia overnight

The rise in the UST 10Y yield to nearly 1.80% post the US non-farm payrolls data modestly weighed on sentiment during the Asian session. Adding some weight to sentiment were newswire reports of the first omicron variant cases of Covid in Mainland China. At the time of writing, a modest majority of Asian bourses were trading higher. S&P500 futures were trading slightly in the green. The USD made a modest comeback during the Asian session, but a short squeeze led to the AUD being the strongest performer in the session and the EUR and JPY being the weakest performers in the session.

Citi

European Open

Ripples were present in the markets following a strong jobs report from the US last Friday. DXY ticked higher during the Asia session as a treasury futures slide provided a USD boost, even as cash markets were closed for Japan’s Coming-of-Age Day. G10 was mostly in the red by a tad, although there were little in the way of notable moves. Potential use of Article 16 is on the table according to comments from UK Foreign Secretary Liz Truss on Sunday, should talks with the EU on Northern Ireland fail. Reports on Saturday highlighted the potential emergence of a “Deltacron” strain, although we note that scientists have speculated about the findings being a result of an error.

USD

A post-payroll follow-through seen in rates markets as Fed rate expectations drive. Treasury futures opened lower and extended losses, now testing Friday’s lows. Despite cash markets closed due to Japan’s Coming-of-Age Day, volumes are running roughly in line with recent averages. The curve is bear flattening with 10y yields implied higher by ~3bps which puts cash bond yields around 1.79%. The belly of the curve is leading the weakness with Eurodollar futures lower as selling flows emerge in greens, with more Fed tightening being priced in.

CIBC

FX Flows

$YEN found bids near 115.50, some chatter by one reporter that they are linked to gamma play but I belief part of the bids are linked to retail day traders, they have been short and should be reducing their positions. I am certain they will add to shorts above 116.00. In terms of FX options, there are more than $3bn worth of 116.00 strikes and about $2.5bn of 115.50 strikes due this week.

AUD$ gained on back of AUD¥, small resistance ahead of 0.7200, stronger at 0.7280, a tough level to breach, tried several times and failed. Mild data released this morning, Melbourne Institute inflation expectations slightly lower than previous month, not a market mover. Tomorrow we will have November trade data, trade surplus little lower from previous month at A$10.6bn. November retail sales is also expected to be lower at +3.7% from +4.9%.