BTP: 10-year Spread To Bunds Back Below 100bps As Equites Turn Positive
May-21 14:30
Fresh tightening seen in the 10-year BTP/Bund spread as European equity futures turn positive on the session. The spread is back below 100bps once again. As noted earlier, the immediate downside target is at ~97.7bps (Sep 2021 low), which shields the February 2021 low at ~90bps.
- Echoing last week’s MNI Policy Team piece, BBG sources have reported that the EU are preparing a fresh trade proposal for the US to inject momentum into talks.
- We have previously noted that progress on an EU-US trade deal may be required for the BTP/Bund spread to sustain a meaningful push below 100bps.
- MNI’s latest EuropePi noted that BTP positioning has remained in typical “long” territory during the course of May.
- The May flash PMIs headline tomorrow’s Eurozone data calendar. While a June ECB cut remains essentially fully priced in ECB-dated OIS, there is still scope for dovish repricing in the July and September contracts if downside growth risks continue to increase.
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US DATA: Weak LEI Reflects Of Weaker Manufacturing, Tighter Financial Conditions
Apr-21 14:28
March's Conference Board leading economic index (LEI) was softer than expected at -0.7% M/M (-0.5% survey, -0.2% prior which is an upward revision from -0.3%). The coincident index rose 0.1% (0.3% prior), with the lagging index -0.1% (+0.3% prior).
- This was the weakest monthly change in the LEI since October 2023, in keeping with other indicators that appear to have been negatively impact by tariff uncertainty.
- The Conference Board release notes "the data does not suggest that a recession has begun or is about to start", though the LEI hasn't been a particularly reliable indicator of recession in this cycle, having printed in negative territory for a few years now. On a 6-month basis, the index is actually trending up from the early 2023 lows, but this doesn't offer much confidence in the outlook in and of itself.
- MNI interprets the LEI more as a manufacturing cycle indicator: it is very heavily weighted toward cyclicality in manufacturing: avg weekly manufacturing hours (25%) and ISM New Orders (17%) are combined over 40% of the index, when added to core capital goods orders (5%) and manufacturers' new orders (consumer goods and materials, 8%).
- That being said, the biggest contributor to March's LEI drop was financial conditions (equity prices, leading credit index, spreads) for the weakest such conditions since October 2023. The accompanying chart shows MNI's grouping of contributing sectors to the LEI.
US TSY FUTURES: BLOCK: Jun'25 10Y Buy
Apr-21 14:25
- +8,000 TYM5 111-05, buy through 111-04 post time offer at 1016:29ET, DV01 $512,000. The 10Y Contract trades 111-07 last (+1.5) nearing overnight high of 111-07.5
US TSYS: Bonds Bounce, Cuves Steeper on Trump's "Preemptive Cuts" Call
Apr-21 14:14
- Treasury futures are climbing off morning lows in the minutes after Pres Trump's latest tweet berating Fed Chairman Powell and reiterating a call for "preemptive cuts".
- Curves maintain steeper profile as short end surges: 2s10s currently at 61.646 +9.400 vs. 62.245 high, 5s30s +8.231 at 94.038. Jun'25 10Y futures -3.5 at 111-02 vs. late overnight high of 111-07.5. Technical resistance above at 111-17.5 (Apr 16 high).
- In turn, projected rate hike pricing gain momentum vs. morning levels (*) as follows: May'25 at -3.4bp, Jun'25 at -20.3bp (-19bp), Jul'25 at -43.1bp (-40.1bp), Sep'25 -62.9bp (-59.9bp).
- Stocks reacting negatively, extending lows with SPX eminis slipping to 5207.5 low, Consume Discretionary and IT sectors underperforming.
