US TSYS: Market Roundup: Keeping Eye on the Fed
May-13 14:32
FI holding weaker levels on moderate volumes by midmorning (TYM2>725k), little react to morning data (import prices lower than exp at +0.0%; U/Mich sentiment 59.1 vs 64 est, "lowest reading since 2013").
- Tsy 30Y Bond futures holding to narrow band on the way down (30YY taps 3.0836 high), curves mixed/off earlier highs (2s10s currently +2.61 at 31.04 vs. 32.843H). The 5s30s spd still holding above inversion currently at 2.968 (+.454) vs. 4.887 high earlier.
- Focus really back on Fed policy after after Fed Chair Powell said he's prepared to consider larger than 50bp hikes in Marketplace interview late Thu (after downplaying 75bp moves at his press conference last week), as the committee adapts to "incoming data and the evolving outlook".
- Short end weaker while levels adjust lower (again) out the curve to reflect hawkish policy to combat inflation.
- US 10Y technicals: with TYM2 at 119-05 (-27) primary downtrend remains intact, however a corrective (bullish) cycle has been established this week and suggests potential for short-term gains. The contract has traded above the 20-day EMA and this opens 120-18+, the Apr 27 high. This level represents an important short-term resistance where a break would signal scope for a stronger retracement. Key support and the bear trigger is unchanged at 117-08+.
- Cross-assets: WTI Crude Oil (front-month) holding gains +3.30 at $109.43; Gold down but well off lows at $1815.58 -6.24.
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MNI: BOC ISN'T ACTIVELY CONSIDERING BOND SALES AS PART OF QT
Apr-13 14:30
- MNI: BOC ISN'T ACTIVELY CONSIDERING BOND SALES AS PART OF QT
- BOC SAYS HALTING PRIMARY AND SECONDARY BOND PURCHASES UNDER QT
CANADA: BOC Econ Projections: Inflation Above Target Through Horizon
Apr-13 14:30
- Higher Inflation: Q4/Q4 figures revised up across the horizon, seen at 4.5% end-2022, two tenth upward revision to 2.4% end-2023 (broadly inline with analyst expectations) and in a new forecast, seen just above the inflation target at 2.1% end-2024.
- Mixed Growth: Revised down to 3.8% 4Q22 (broadly per market as strong start to year offset further out), up two tenths to 2.9% in 4Q23 (more optimistic than 2.6% consensus) and then slowing more materially to 1.7% come 4Q24.
BONDS: EGB/Gilt - Yield unwind
Apr-13 14:23
- EGBs and Bund have continued to bounce off the morning session low, and not even a US PPI beat changed the trend.
- Desk continued to square and take profit heading towards the end of the EU session, with the ECB in mind, and the long Bank Easter holiday weekend.
- Volumes remains quite poor, with RM likely on the sidelines.
- Peripheral spreads are mixed, Spain is 1.2bp wider, and Italy 2.5bps tighter
- .The trend in Gilts remains and underperforms Bund, a follow through post the morning UK CPI beat.
- But similarly, some locking profits, after the huge moves higher in yield we have had in Global Bonds.
- Gilt/Bunds spread sits 2.6bps wider.
- Looking ahead, most of the focus turns to the ECB tomorrow.
- Gilt futures are down -0.09 today at 119.40 with 10y yields up 0.7bp at 1.809% and 2y yields down -0.7bp at 1.492%.
- Bund futures are up 0.43 today at 155.79 with 10y Bund yields down -2.2bp at 0.766% and Schatz yields down -0.8bp at 0.061%.
- BTP futures are up 0.69 today at 134.78 with 10y yields down -4.2bp at 2.364% and 2y yields down -2.8bp at 0.422%.
- OAT futures are up 0.45 today at 147.97 with 10y yields down -3.0bp at 1.265% and 2y yields down -4.3bp at 0.092%.
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