JGBS: Futures Reverse Lower Post Trump Speech, 10yr Sale Still To Come

US treasury futures are steady Tuesday with limited follow on from the overnight sell off on inflationary fears.  The 10-Yr is up +01 at 113-03+ above all major moving averages, and back below overbought on the 14-day relative strength index. 

Cash has continued to weaken, though the pace has slowed dramatically.  

• The 2-Yr is flat at 3.477%
• The 5-Yr is flat at 3.612%
• The 10-Yr is up +0.4bps at 4.042%
• The 30-Yr is up +1.2bps at 4.694%

Typically longer bonds are most sensitive to inflation fears.  The 30-Yr is currently near to the bottom end of the 3-month range of 4.61% - 4.92%, suggesting upside risks for yields could build.  

Tuesday Calendar:  

• 03/03 -- Wards Total Vehicle Sales
• 03/03 0955 NY Fed Williams moderates discussion
• 03/03 1130 US TSY -  $90B 6W bill auction
• 03/03 1155 MN Fed Kashkari Bbg investment confernce

Source: Bloomberg Finance L.P. / MNI

The USD index is holding a little lower for the session, last near 1195. Higher beta plays are outperforming, led by AUD. The move down in the USD/CNY fixing and the strong CNY onshore open is also spilling over to AUD. AUD/USD was last near 0.7115, with recent highs at 0.7137 an upside focus point. USD/CNH is back under 6.8800, likewise for onshore USD/CNY spot. Highs in USD?CNH yesterday were at 6.9133 

• Oil prices holding higher, but still under Monday highs. Brent crude last just under $79/bbl. Equity sentiment less positive, but US cash markets outperformed in Monday trade. Eminis were last off around 0.40%.
• Some offset for the AUD also coming from higher precious metals (gold +1% to be near $5400), while remarks earlier from RBA Governor Bullock (every RBA meeting live etc) also likely helping the A$ at the margins.

The effects of the provision of liquidity over Lunar New Year is starting to decline with Repo rates declining moderately.

• The PBOC issued CNY34.3bn of 7-day reverse repo at 1.4% during this morning's operations.
• Today's maturities CNY 526bn of 7-day reverse repo
• Net liquidity withdrawal CNY491.7bn.
• The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.43%, from prior close of 1.46%.
• The China overnight interbank repo rate is at 1.25%, from the prior close of 1.29%.
• The China 7-day interbank repo rate is at 1.44%, from the prior close of 1.45%.