US TSYS: Asia Wrap - Yields Edge Higher In A Quiet Session, Awaits FOMC
Jul-30 04:20
The TYU5 range has been 111-10+ to 111-13 during the Asia-Pacific session. It last changed hands at 111-11+, unchanged from the previous close.
- The US 2-year yield has edged higher trading around 3.87%.
- The US 10-year yield has shifted higher trading around 4.326%, up 0.01 from its close.
- The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, decent supply was seen around 4.30/35% first up. A decent bounce was seen off this support but the move has failed to follow through above 4.40% for now. The Data this week should hopefully provide more clarity going forward. A Clear break of the support opens a move to the bottom end of the range.
- Renaissance Macro Research on X: ”Trade, inventory investment and public sector spending & investment adding 2.2ppts in Q2, according to Atlanta Fed. Thus, private domestic demand is running under 1% in real terms.”
- Andreas Steno Larsen on X: “The US has got the softest inflation surprises on Earth. That should impact the FOMC tomorrow.”
- Jeff Weniger on X: “The phone bill. Cereal. Gas. Coffee. A used car for work. These are things people still buy even when money is a big problem. The 12-month smoothed inflation rate on essentials is 1.8%. The last time the Fed Funds rate exceeded "essentials inflation" by this much was Q3/2007.” See Fig.1 below.
- Data/Events: MBA Mortgage Applications, ADP, US Treasury Quarterly refunding, GDP, Pending Home Sales, FOMC
Fig 1: Fed Funds vs "Essential Purchase" Inflation
Source: MNI/@JeffWeniger
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US TSYS: Asia Wrap - Long-End Yields Edge Higher
Jun-30 04:19
The TYU5 range has been 111-22 to 111-27 during the Asia-Pacific session. It last changed hands at 111-24, down 0-02 from the previous close.
- The US 2-year yield is almost unchanged trading around 3.748%.
- The US 10-year yield has edged higher trading around 4.287%, up 0.01 from its close.
- Block Sell FVU5: SELL 3463 of FVU5 traded at 108-27 1/4, post-time 12:44:04 AEST (DV01 $150,988). The contract is currently trading at 108-27+, -0-00 1/4 from closing levels.
- The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target. 10-year yields should now find demand on any bounce back to the 4.35/40% area.
- (Bloomberg) - “In the week ended June 24, positioning data showed a heavy amount of short covering from hedge funds in US 10-year note futures, according to latest CFTC data. Elsewhere, asset managers liquidated net longs in 10-year note futures, while adding to duration long in ultra 10-year note futures.”
- (Bloomberg) - “Trump’s $4.5 trillion tax-cut bill now shifts to the Senate, where a final vote is expected to spill into Monday. The Senate version would add $3.3 trillion to US deficits over a decade, the Congressional Budget Office estimated.”
- Data/Events: MNI Chicago PMI, Dallas Fed Man. Activity
US TSYS: Viewpoints On No Debt To Be Issued Beyond 9 Months
Jun-30 03:24
President Trump made some statements that have been garnering some attention regarding Issuance as a result of what he states is a Fed that is behind the curve and should be cutting. President Trump said he had “ instructed my people not to do any debt beyond nine months or so.” Below are some viewpoints relating to this:
- Jim Bianco on X: “Trump said he was going to refinance the $9 trillion as short-term debt because "we have a stupid person" at the Federal Reserve. The president explained his desire for the Federal Reserve to lower interest rates so the U.S. does not have to pay for 10 years of debt at a higher rate.
- "Then we’re gonna get somebody into the Fed who’s going to be able to lower [the rates]," Trump said, noting the rates should be at 1 or 2%. "You know, if you look at Switzerland, they’re the lowest right now. They’re at much less than one point, and frankly, we should be there, too, because… without the United States, the whole world doesn’t work.
- “So is Bessent going to pile massive borrowing into the T-Bill market? Then Trump will appoint someone who will cut rates, allowing them to refinance at lower rates.”
- Andreas Steno Larsen on X: “Trump: “I don’t want to pay for 10-year debt at a higher rate.” If that’s not an obvious debasement trade, what is?”
- Andy Constan on X: “Just to be clear, this "instruction" resulting in the cancellation of 3.3TN in coupon auctions over 9 months would be an annual pace of 4.4TN of QE or double the monthly pace of any QE in history.”
- “Without coupon supply those that need to own coupons have two choices. Buy bills and earn zero or negative risk premium over cash or buy coupon adjacent securities. Asset inflation and eventually goods inflation results from starving coupon buyer demand.”
JGBS: Moderately Cheaper, US Tariff Agreement In Focus, Factory Output Misses
Jun-30 03:20
At the Tokyo lunch break, JGB futures are weaker, -15 compared to the settlement levels.
- (Bloomberg) -- Japan is continuing to “actively” pursue a tariff agreement with the US that benefits both countries, while protecting its own national interest, Deputy Chief Cabinet Secretary Kazuhiko Aoki says in a press conference Monday.
- “US President Donald Trump characterized trade in cars between the US and Japan as unfair and floated the idea of keeping 25% tariffs on autos in place.” (BBG)
- Japan's factory output rose 0.5% in May, missing analysts' estimates of a 3.5% gain, as US tariffs hit the nation's exports.
- Cash US tsys are slightly mixed, with a steepening, in today's Asia-Pac session after Friday's modest losses.
- Cash JGBs are flat to 2bps cheaper across benchmarks, with the 20-30-year bucket underperforming. The benchmark 10-year yield is 0.8bp higher at 1.446% ahead of tomorrow’s supply.
- Swap rates are 1-2bps higher.
