EU CREDIT UPDATE: CREDIT UPDATE: EU Close
Jun-06 15:31
- Low dispersion in €IG into the close today, wideners led by normal higher beta REITS HEIBOS & CPI on a +4bp move in belly bunds. Broader €IG is tad tighter helping reverse some of the +2bps of widening we faced WTD on busy primary, falling rates & ~flat to weak equity sentiment.
- PCF in €HY moved +6.5pts to €84.3. Its nearly +10pts on the week & reports are its is on potential A&E support from a party through equity injection.
- Bunds end +4 in the belly (short-end driven ~parallel move). ECB delivered a expected 25bp cut but the upward revisions to '24 & '25 core inflation projections, alongside a lack of pre-commitment to future cuts, drove a initial hawkish reaction. While Lagarde did not confirm that the ECB had entered the “dialling back” phase of policy restriction, she did note that there was a “strong likelihood” that this was the case. 35bps of cuts are priced across the remaining 4 meetings this year, down from 40bps yest.
- Equity vol was low as well, Aroundtown (-6%) the only mover, €IG basket ends +0.3%, RE (-1.1%) only sector mover.
- $IG looks weak despite only 4 deals (though Energy Transfer & John Deere bringing multi-tranche) - its underperformed 2bps this week (vs. €IG) & now lags our -29bp YTD move by 16bps.
- Our primary was closed today, it should reopen tomorrow for Barry Callebaut.
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US TSYS: US TSY 42D AUCTION: NON-COMP BIDS $328 MLN FROM $75.000 BLN TOTAL
May-07 15:15
- US TSY 42D AUCTION: NON-COMP BIDS $328 MLN FROM $75.000 BLN TOTAL
SEK: Overnight Implied Vols Bid Ahead Of Riksbank Tomorrow
May-07 15:10
There is a contingent of analysts that still expects the Riksbank to keep rates on hold at tomorrow’s meeting (7 out of 20 surveyed by Bloomberg). As such, overnight options in SEK crosses exhibit a notable volatility premium.
US TSY FUTURES: Nearing Technical Resistance
May-07 14:58
- Treasury futures continue to extend midmorning gains - no obvious headline for bid, but Jun'24 5Y Block sale sees move stall near highs: -5,000 FVM4 105-27.5, post time bid at 1048:02ET, DV01 $206,000, contract trades 105-27.5 last (+4).
- The Jun'24 10Y taps 109-07 high (+10.5) nearing resistance of 109-08.5 (50-day EMA and channel resistance) followed by 109-09.5 (May 3 high) and 109-22+ (38.2% retracement of the Feb 1 - Apr 25 bear leg).
- So much for today's heavy slate of corporate bond issuance keeping rates range bound due to rate lock hedging. , or block driver at play. Short end bid but lagging as curves bull flatten: 2s10s -3.159 at -37.889.
- Projected rate cut pricing gaining slightly vs. morning levels: June 2024 at -15.0% w/ cumulative rate cut -3.8bp (-2.5bp earlier) at 5.298%, July'24 at -24% w/ cumulative at -9.8bp (-8.5bp earlier) at 5.238%, Sep'24 cumulative -22.4bp vs -21.3bp, Nov'24 cumulative -32.0bp vs. -31.3bp, Dec'24 cumulative currently -46.5bp vs. -44.8bp.
