US TSYS: Fed Speakers Echo Chairman Powell, No Hurry to Cut Rates
- Treasuries look to finish steady (TYM5) to mildly mixed, curves flatter with Bonds weaker late Friday.
- Rates bounced after Pres Trump posted on his media platform that a 80% tariff on China "seems right", but is "up to Scott B" (referring to Treasury Secretary Scott Bessent).
- The WSJ reported "President Trump's suggestion of lowering tariffs on Chinese imports to 80% was just a number he "threw out there," White House press secretary Karoline Leavitt said without explaining more on how he arrived at the figure."
- Multiple Fed speakers commented on the economy after exiting the policy blackout. A smaller Federal Reserve balance sheet would benefit the economy by creating greater clarity about the central bank's main policy instrument and allowing officials to heed closer to traditional policy rules, former Fed Governor Kevin Warsh.
- Atlanta Fed Bostic supports no rate adjustment amid uncertainty while NY Fed’s Williams echoes Chairman Powell's view there is no hurry to cut rates. Speakers resume at this evening's Hoover conference at 1945ET with StL Fed Musalem, Cleveland Fed Hammack & Fed Gov Cook on policy panel with ECB's Schnabel.
- Slow start to the week ahead, main focus is on next Tuesday's CPI inflation data for April, Retail Sales next Thursday.
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AUDUSD TECHS: Oversold But Remains Bearish
- RES 4: 0.6409 High Dec 9 and a key resistance
- RES 3: 0.6389 High Apr 3
- RES 2: 0.6270 50-day EMA
- RES 1: 0.6127/0.6187 High Apr 7 / Low Mar 4
- PRICE: 0.6018 @ 15:46 BST Apr 9
- SUP 1: 0.5915 Intraday low
- SUP 2: 0.5900 Round number support
- SUP 3: 0.5830 2.000 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 4: 0.5729 2.236 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD maintains a bearish tone following the latest steep sell-off. The move down confirms a resumption of the downtrend that started late September last year. A key support at 0.6088, the Feb 3 low, has been broken. This paves the way for an extension towards the 0.5900 handle next. On the upside, resistance to watch is at 0.6187, the Mar 4 low. The trend is oversold, a recovery would allow this set-up to unwind.
US TSYS: Late SOFR/Treasury Option Roundup: Rate Cuts Retreat, Trump Tariff Redo
Frenetic session for rates trading, early SOFR & Treasury options started off with better upside call trade - rotated to puts after Pres Trump raised China tariff to 125% effective immediately, while granting 90 day pause for 75 other countries and lowering the reciprocal tariff lvl to 10%. Clarity still needed on who is in the pause group. Underlying futures remain under -- most notable for Tsys is the swing in curves - from new 3 year highs overnight (2s10s tapped 73.847) to 44.835 at the moment (38.225 low). Projected rate hike pricing retreats: current levels vs. this morning (*) as follows: May'25 at -6bp (-13.4bp), Jun'25 at -22bp (-37.9bp), Jul'25 at -38.9bp (-61.4bp), Sep'25 -54.6bp (-79.3bp). Year end projection of 75bp total rate cut vs. full point this morning.
- SOFR Options:
- Block, 5,000 SFRM5 95.62/95.75 put spds 1.0 over 96.00/96.12 call spds ref 95.915
- Block, 48,000 SFRM5 96.25/96.87 call spds 9.0-8.5 ref 96.10 to -.095
- -6,000 SFRM5 96.25 calls, 18.0 vs. 96.105/0.40%
- +70,000 SFRM5 97.50/98.50 call spds 3.0-3.25 ref 96.10
- Block/screen +57,000 SFRM5 96.50/97.25 call spds 6.5-7.0 ref 96.125 to -.10
- +10,000 SFRM5 95.68/95.75/95.81 put flys, 0.75 ref 96.10
- -5,000 0QM5 96.75/97.00/97.25 2x2x1 call flys, 12.0 ref 9684
- +4,000 2QM5 96.43 puts vs 3QM5 96.25 puts, 3.5 net db/Blue Jun over
- 9,000 0QK5 98.00 calls, 3.0 ref 96.86
- Block, 7,500 2QJ5 96.43 puts, 2.5 ref 96.675
- Block, 3,000 SFRU5 97.50/98.50 2x3 call spds, 10.5 ref 96.50
- 2,000 SFRH6 94.62/95.62 put spds ref 96.825
- 2,000 SFRM5 95.75/95.93/96.18/96.38 call condors ref 96.12
- over 8,100 SFRJ5 96.00 calls, 18.0 last ref 96.115
- 4,500 SFRU5 96.50/97.00 call spds ref 96.435
- 2,000 0QK5/2QK5 97.25 call spds
- 2,000 SFRM5 96.75/97.50 call spds vs. 2QM5 97.50/98.25 call spds
- 2,000 SFRM5 95.75/95.81/95.88 put trees ref 96.085
- Block/screen, 13,000 SFRM5 96.50/97.25 call spds ref 96.125
- Block, 5,000 SFRK5 95.81/95.93/96.00/96.06 broken call condors, 5.0 ref 96.155
- Block, 4,000 SFRM5 95.62 puts, 1.0 ref 96.18
- Treasury Options:
- Block, 30,000 TYK5 108.5 puts 11 vs. 110-11/0.02%
- 4,500 USK5 115/117 call spds, 48 ref 113-22
- 20,000 FVM5 110/111.5/113 call flys, 2 ref 108-04.25 to -05
- 3,500 FVM5 110.5/111 call spds ref 108-07
- 10,000 FVK5 106.25/106.5/107/107.25 put condors ref 108-04.25
- 2,000 wk3 TY 110.75/112 strangles ref 110-22 (exp 4/17)
- over 4,600 TYM5 112 calls, 60 ref 110-24
- 6,000 UXYM5 109/110 put spds ref 112-12
- 4,000 UXYM 112/113 put spds ref 112-12
- over 10,300 USK5 113 puts, 143 last
- over 11,000 USK5 116 calls, 131 last
- 5,200 USK5 117/120 call spds, 25 ref 114-12 to -11
- over 6,000 TYM5 112.5 calls, 50 last ref 110-30.5 to -31
- 1,000 TYK5 112.5/113.5/114.5/116.5 broken call condors ref 110-27
- 1,300 FVM5 107/107.5 put spds, 13 ref 108-08
- 2,500 TYK5 112/113 call spds ref 110-26
BONDS: EGBs-GILTS CASH CLOSE: Big Gilt Underperformance Pre-US Tariff Pause
Gilts continued to sell off Wednesday, badly underperforming Bunds.
- Bunds remained relatively steady vs global counterparts during most of the session's trade, which was dominated by risk on / risk off considerations with regard to US tariffs.
- Gilts remained under extreme pressure, especially at the long end with no particular driver on the day for outperformance, though long-term UK fiscal concerns appeared to remain front-of-mind.
- But there was a sharp sell-off in Bund futures after the European cash close as US President Trump announced that all countries except China would be subject to a 10% universal tariff amid a 90 day pause on the higher "Liberation Day" reciprocal tariffs.
- For Thursday's cash session, the German curve bull steepened sharply, with the UK's bear steepening.
- Periphery/semi-core EGB spreads widened sharply - though this move looks likely to reverse upon Thursday's open if the equity rebound holds.
- Thursday's schedule includes an MNI event with BOE's Breeden, and Italian industrial production data.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 11bps at 1.725%, 5-Yr is down 7.2bps at 2.102%, 10-Yr is down 4bps at 2.591%, and 30-Yr is down 5.7bps at 2.965%.
- UK: The 2-Yr yield is up 2.7bps at 3.991%, 5-Yr is up 9.4bps at 4.221%, 10-Yr is up 17.4bps at 4.779%, and 30-Yr is up 23.3bps at 5.58%.
- Italian BTP spread up 6.5bps at 129.1bps / Greek up 6.5bps at 97.6bps
