SWITZERLAND: 0.8333 Remains Significant Pivot for USDCHF
Apr-25 10:56
- USDCHF rallied across the APAC session amid the overnight strength for global equities, touching a high of 0.8335 before moderating. The inability to break back above the prior breakdown point & 2023 low at 0.8333 remains significant and keeps a sell-on-rallies theme dominant here. Firm resistance is also seen at the 20-day EMA, intersecting at 0.8371.
- President Schlegel earlier today has reiterated that FX intervention is "not about achieving a specific exchange rate target. In principle, Switzerland has flexible exchange rates. However, if exchange rate movements influence monetary conditions in such a way that price stability is threatened, then we react". Sentiment appears in line with recent comments from SNB’s Tschudin and does not represent an escalation of intervention rhetoric in our opinion.
- Domestic sight deposits data Monday will indicate if the SNB (surprisingly) tilted towards action this week. Historically a keenly watched proxy for interventions, data has remained relatively stable through the month.
- Elsewhere, the Swiss government held talks with US' Bessent - President Keller-Sutter commented "it’s good that Switzerland is one of the 15 countries that get, yes, somewhat preferential treatment here".
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OPTIONS: Larger FX Option Pipeline
Mar-26 10:54
- EUR/USD: Mar27 $1.0750(E1.3bln), $1.0800(E1.9bln), $1.0820-25(E1.3bln), $1.0850-65(E1.9bln); Mar28 $1.0700(E1.1bln), $1.0800(E2.2bln)
- USD/JPY: Mar28 Y151.00($1.2bln)
- EUR/GBP: Mar31 Gbp0.8360-70(E1.1bln)
- USD/CAD: Mar28 C$1.4145-50($1.2bln)
US TSYS: Bear Steeper On Thin Volumes, Multi-Pronged Session Ahead
Mar-26 10:50
- Treasuries are within session ranges to sit modestly bear steeper on thin volumes, underperforming Gilts (softer than expected UK CPI) and less so EGBs (pullback in equities).
- It’s ahead of a docket covering various angles including durable goods data (for Feb, i.e. prior to March mfg surveys rolling over), the CBO’s X date projection, Fedspeak and 5Y supply.
- Cash yields are 1.1-2.7bp higher, with 3s lagging and 20s leading increases.
- 2s10s sees an additional mechanical adjustment higher with a new 2Y taking benchmark after yesterday’s auction, leaving 2s10s at 32.6bps (+2.4bp) for highs since Mar 14.
- The front-end to belly outperforms despite supply ahead, with both $28bn 2Y FRN and $70bn 5Y auctions. Yesterday’s 2Y came in almost on the screws but with a step higher in bid-to-cover.
- TYM5 at 110-19 (-05+) is back within earlier ranges after a brief lift to 110-23, on particularly low volumes of just over 200k.
- Data: MBA mortgage data (0700ET) and Durable goods orders/shipments Feb prelim (0830ET)
- Fedspeak: Kashkari hosts Fed Listens event (1000ET), Musalem on economy/mon pol (1310ET, text + Q&A) – see STIR bullet
- Other: CBO publishes its X date projection (1000ET)
- Coupon issuance: US Tsy $28B 2Y FRN - 91282CMJ70 (1130ET), US $70B 5Y Note auction - 91282CMU2 (1300ET)
- Bill issuance: US Tsy $60B 17W bill auction (1130ET)
US TSYS: BofA Hold Soft Long Bias Given “Tension Of Hard vs. Soft Data”
Mar-26 10:50
Bank of America write “the U.S. rates market appears torn between two opposing themes: 1) deteriorating sentiment & downside growth risks, and 2) stable hard data & sticky inflation”.
- They note that “yields have repriced lower to reflect higher downside growth risks from tariff uncertainty. However, hard data has remained resilient and upside inflation risks remain. U.S. rates will likely be stuck until the hard data breaks or disproves soft sentiment data”.
- On the concept of how to trade this setup, Bank of America recommend “fading extremes in sentiment swings until hard data provides a clearer signal, we suspect a near-term range of 4.15-4.5% for 10s & hold a soft long bias in that range”.
- On the curve, they point to a “continued steepening bias in 5s30s”.
- In inflation products, they like long 1y4y inflation swaps “given tariff risks” as well as the hedging aspect they provide for duration longs.
