SWITZERLAND: EURCHF Extends Recovery, Breaches Moving Averages

• EUR/USD: Mar27 $1.0750(E1.3bln), $1.0800(E1.9bln), $1.0820-25(E1.3bln), $1.0850-65(E1.9bln); Mar28 $1.0700(E1.1bln), $1.0800(E2.2bln)
• USD/JPY: Mar28 Y151.00($1.2bln)
• EUR/GBP: Mar31 Gbp0.8360-70(E1.1bln)
• USD/CAD: Mar28 C$1.4145-50($1.2bln)

• Treasuries are within session ranges to sit modestly bear steeper on thin volumes, underperforming Gilts (softer than expected UK CPI) and less so EGBs (pullback in equities).  
• It’s ahead of a docket covering various angles including durable goods data (for Feb, i.e. prior to March mfg surveys rolling over), the CBO’s X date projection, Fedspeak and 5Y supply.
• Cash yields are 1.1-2.7bp higher, with 3s lagging and 20s leading increases.
• 2s10s sees an additional mechanical adjustment higher with a new 2Y taking benchmark after yesterday’s auction, leaving 2s10s at 32.6bps (+2.4bp) for highs since Mar 14.
• The front-end to belly outperforms despite supply ahead, with both $28bn 2Y FRN and $70bn 5Y auctions. Yesterday’s 2Y came in almost on the screws but with a step higher in bid-to-cover.  
• TYM5 at 110-19 (-05+) is back within earlier ranges after a brief lift to 110-23, on particularly low volumes of just over 200k.
• Data: MBA mortgage data (0700ET) and Durable goods orders/shipments Feb prelim (0830ET)
• Fedspeak: Kashkari hosts Fed Listens event (1000ET), Musalem on economy/mon pol (1310ET, text + Q&A) – see STIR bullet
• Other: CBO publishes its X date projection (1000ET)
• Coupon issuance: US Tsy $28B 2Y FRN - 91282CMJ70 (1130ET), US $70B 5Y Note auction - 91282CMU2 (1300ET)
• Bill issuance: US Tsy $60B 17W bill auction (1130ET)

Bank of America write “the U.S. rates market appears torn between two opposing themes: 1) deteriorating sentiment & downside growth risks, and 2) stable hard data & sticky inflation”.

• They note that “yields have repriced lower to reflect higher downside growth risks from tariff uncertainty. However, hard data has remained resilient and upside inflation risks remain. U.S. rates will likely be stuck until the hard data breaks or disproves soft sentiment data”.
• On the concept of how to trade this setup, Bank of America recommend “fading extremes in sentiment swings until hard data provides a clearer signal, we suspect a near-term range of 4.15-4.5% for 10s & hold a soft long bias in that range”.
• On the curve, they point to a “continued steepening bias in 5s30s”.
• In inflation products, they like long 1y4y inflation swaps “given tariff risks” as well as the hedging aspect they provide for duration longs.