US TSYS: Curves Close To YtD Steeps, Govt Shutdown Odds Surge
Dec-20 11:54
- Treasuries have steepened further overnight with the front end continuing to pare Wednesday’s Fed-induced sell-off but still not fully pricing two further 25bp cuts for Dec (see STIR bullet).
- Political developments are to the fore after yesterday’s collapse of the latest spending plan, with Polymarket showing a 70% implied probability of a government shutdown. See our political risk team’s write-up on the matter here.
- Cash yields are 0.5-4.6bp lower on the day, with the declines led by the belly after being dragged higher by a particularly weak 5Y TIPS auction yesterday with a 6.7bp tail.
- 2s10s of 26.6bps (+1.6bp) is close to yesterday’s fresh ytd high of 28bps.
- TYH5 is close to session highs of 108-29 (09+) on reasonable volumes of 305k. It continues a lift off yesterday’s low of 108-16+ (now an initial support level). The bear trend remains intact with further support at 108-12+ (1.382 proj of the Oct 1-14-16 price swing) whilst resistance is seen at 110-07+ (20-day EMA).
- Data: Monthly PCE report Nov (0830ET), U.Mich final Dec (1000ET), Kansas Cit Fed services Dec (1100ET)
- Fedspeak: Daly on BBG TV (0730ET), Williams on CNBC (0830ET)
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US TSYS: Geopol Risk Haven Play Fades, Fedspeak And Earnings Ahead
Nov-20 11:51
- Treasuries trade moderately lower today on a variety of factors including a Reuters source suggesting Russia President Putin is open to discussing a Ukraine ceasefire deal with President-elect Trump and firmer-than-expected UK CPI inflation (following CAD CPI yesterday).
- We write more on today’s potentially impactful Fedspeak in the previous STIR bullet but broader risk sentiment can also be impacted by today’s Nvidia earnings after the close.
- Cash yields are 2-3bp higher on the day, led by 20s and 30s, although yields remain comfortably within the week’s range across the curve.
- TYZ4 trades within a few ticks of session lows of 109-17 (-10) on modest cumulative volumes of 335k. That includes a boost from the quarterly roll although it remains light at less than 10% complete (today’s spread activity has mostly been concentrated in 5s).
- The further pullback from yesterday’s high of 110-04+ helps reaffirm the bearish trend condition, with support seen at 108-30 (Nov 15 low) before 108-18+ (1.236 proj of Oct 1-10-16 swing).
- Data: MBA mortgage applications, Nov 15 (0700ET)
- Fedspeak: Barr (1000ET), Cook (1100ET), Bowman (1215ET), Collins (1600ET) – see STIR bullet.
- Note/bond issuance: US Tsy $16B 20Y Bond auction - 912810UF3 (1300ET)
- Bill issuance: US Tsy $64B 17W & $50B 40D CMB auctions (1130ET)
BONDS: EUREX ROLL UPDATE
Nov-20 11:48
It is very early for Eurex rolls, rolling Dec positions into March, since the last trading day is still only on the 6th Dec.
Nonetheless the Bobl spread is lifted here:
- OEZ5/OEH5 lifted for 70 in ~13.13k.
In terms of views, JPM:
- Buxl: Bullish.
- Bund: Bullish.
- Bobl: Bullish.
- Schatz: Neutral.
- OAT: Bullish.
- BTP: Neutral.
SEK: USDSEK Through Yesterday's High, Trendline Resistance Intact
Nov-20 11:47
Today’s broad dollar rally has weighed on the Swedish krona, pushing USDSEK through yesterday’s high, now up 0.7%. Trendline resistance drawn from the September 2022 high has contained upside over the past six sessions, which has allowed an overbought condition (implied by the 14-day RSI) to unwind a little.
- A pullback through the 20-day EMA at 10.7827 is required to cancel the recent bullish theme, while shallower sell-offs will be considered corrective.
- Today’s Swedish calendar is limited, with Riksbank’s Bunge scheduled to speak on an ECB panel on financial stability analysis at 1615GMT/1715CET.
- Today’s backdrop has also pressured the NOK, leaving NOKSEK little changed at 0.9960. Clustered resistance around 0.9988 (June 21 high), parity and 1.0016 (July 4 high) provide the next topside targets.
