US TSYS: Bear Steeper In Another Lighter Start Before CPI and 10Y Supply
- Treasuries are bear steeper as they extend yesterday’s post-1000ET sell-off, with CPI in focus (MNI Preview) before 10Y supply. For the latter, long-end pressures are less acute than has been the case in previous months but it will nevertheless mark an important test of duration demand.
- A federal appeals court yesterday extended a short-term reprieve for the Trump Administration as it challenges last month’s trade court ruling that blocked tariffs. Trump has just now described this as a “great and important win for the US”.
- Today’s China statement after a conclusion of US-China talks offered nothing concrete. It urged dispute resolution via dialog, vowed to reduce the misunderstanding and promoted the long-term development of China-US ties.
- Cash yields are 1-4bp higher, with increases led by 20s and 30s.
- The modest steepening sees curves lift a little further off what had been flats for recent weeks, including 2s10s at 47.5bp (+1.9bp) and 5s30s at 86.5bp (+2bp).
- TYU5 has recently touched a session low of 110-00+ (- 06) on another overnight session with light volumes, currently at 240k.
- It extends a pullback off yesterday’s high of 110-14 having stopped short of testing 110-19+ (50-day EMA). A bearish threat is still present, with support at 109-26 (May 29 low) before a bear trigger at 109-12+ (May 22 low).
- Data: CPI May (0830ET), Real av earnings May (0830ET), Federal budget balance May (1400ET)
- Coupon issuance: US Tsy $39B 10Y Note re-open - 91282CNC1 (1300ET). Last month’s 10Y saw a strong 1.3bp stop through but with weaker details than the previous auction.
- Bill issuance: US Tsy $60B 17W bill auction (1130ET)
- Bloomberg reports that HK pensions plan to sell down their Treasury holdings within three months if the US loses its last AAA rating (by Japan’s Rating & Investment Information Inc.)
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EQUITIES: Estoxx Put seller
SX5E (18th July) 5125p, sold at 69.20 and 69.00 in ~10k.
BOE: Greene: Tariffs were a factor in Greene's May vote to cut 25bp
"I think on net, tariffs will probably be disinflationary for the UK economy, and that was a factor in determining my most recent decision to cut bank rate by 25 basis points. So there are some inflationary factors. I think on net, there are more disinflationary ones. They'll all hit the economy at different times. But that's certainly a risk that I'm looking at."
GOLD TECHS: Approaching A Key Support
- RES 4: $3600.0 - Round number resistance
- RES 3: $3578.0 - 2.000 proj of the Dec 19 - Feb 24 - Feb 28 swing
- RES 2: $3547.9 - 1.764 proj of the Feb 28 - Apr 3 - Apr 7 price swing
- RES 1: $3435.6/3500.1 - High May 7 / High Apr 22 and bull trigger
- PRICE: $3244.0 @ 11:44 BST May 12
- SUP 1: $3202.0 - Low May 1 and a key support
- SUP 2: $3164.3 - 61.8% retracement Apr 7 - Apr 22 uplegl
- SUP 3: $3157.9 - 50-day EMA
- SUP 4: $2956.7 - Low Apr 7
The latest pullback in Gold appears corrective. Key short-term support to watch is $3202.0, the May 1 low. A clear break of this level would undermine the short-term bullish theme and signal scope for a deeper retracement. This would open $3164.3, a Fibonacci retracement. Note that the 50-day EMA is $3157.9. The medium-term trend condition remains bullish, a reversal would refocus attention on $3500.1, the Apr 22 high and bull trigger.
