US TSYS: Modest Twist Steepening Awaiting FOMC
Jul-26 10:50
- Cash Tsys trade with a twist steepening, pivoting after 5s, with the front end to belly seeing an intraday rally towards levels seen late in yesterday’s session after bank shares fell on news that Banc of California is in advanced talks to buy PacWest, before selling off into the close.
- Today’s FOMC decision is clearly in focus, with implied rates firming marginally for near-term meetings but with a modest increase in 2024 rate cuts supporting the small rally on the day.
- 2YY -0.6bp at 4.868%, 5YY -0.2bp at 4.148%, 10YY +1.0bp at 3.894% and 30YY +1.8bp at 3.947%.
- TYU3 trades 5 ticks higher at 111-24+ in a narrow 7+ tick range and well within yesterday’s range, whilst volumes are subdued at just over 200k. The contract appears to be in retracement mode, with initial support seen at yesterday’s low of 111-17+ after which lies 111-11 (61.8% retrace of Jul 7-18 rally), whilst resistance is seen at 112-17+ (Jul 24 high).
- Data: Whilst clearly secondary on the day, new home sales for Jun (1000ET) are of interest after surging 12% in May, plus we also get the usual weekly MBA mortgage data (0700ET).
- Note/bond issuance: US Tsy $24B 2Y FRN (1130ET)
- Bill issuance: US Tsy $46B 17-W bills (1130ET)
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OUTLOOK: Price Signal Summary - Bund Futures Push Through Resistance
Jun-26 10:47
- In the FI space, Bund futures have started the week on a firm note, extending Friday’s strong rally. The contract is through resistance at 134.77, the Jun 12 high. Friday’s gains have eased recent bearish pressure and the breach of 134.77 signals scope for a stronger recovery towards 135.85, the Jun 1 high. Initial support lies at the 20-day EMA, at 133.64. Key support and the bear trigger lies at 132.12, the May 26 low.
- A strong bounce in Gilt futures Friday, resulted in a clear break of resistance at the 20-day EMA. This eases recent bearish pressure for now, and instead signals scope for a stronger short-term recovery. A continuation higher would expose key resistance at 97.64, the Jun 1 high. The medium-term trend condition remains bearish - a reversal lower and a break of 93.88, the Jun 20 low, would confirm a resumption of the trend.
US TSY OPTIONS: Early Option Roundup
Jun-26 10:42
- Early focus on upside calls in 2s, 5s and 10s, muted volumes with underlying futures trading firmer, TYU3 back near Friday's early highs, TYU3 currently +12 at 113-14.5.
- 2,000 TYU 116 calls, 26 ref 113-13.5
- 1,400 FVQ3 109.5/110 call spds ref 108-00.5
- 3,500 FVQ3 109/110 call spds ref 108-00 to -00.25
- 2,000 USQ3 134/136 call spds, ref 128-16
- over 2,700 TYQ3 115 calls, 16 ref 113-11
- 2,000 TUQ3 102.5 calls, 9 ref 102-03.88
US TSYS: Holding Firmer As US Comes In, 2Y Auction In Focus
Jun-26 10:42
- Cash Tsys trade richer across the curve and sit close to session highs after European timezone weakness in equities and further spillover from a weak German Ifo survey. The combination of drivers has seen 5s outperform, with 2s and 5s currently contained by Friday’s highs but benchmark tenors breaking higher further along the curve.
- A thin docket sees 2Y supply in focus along with headlines, in a session that otherwise sees further heavy bill issuance and another regional Fed manufacturing survey for June after mixed releases so far from Empire (beat), Philly (in-line) & Kansas (miss).
- 2YY -4.0bp at 4.701%, 5YY -5.8bp at 3.932%, 10YY -5.0bp at 3.684% and 30YY -3.9bp at 3.773%.
- TYU3 trades 11+ ticks higher at 113-14, just off an earlier high of 113-15 which stopped just short of Friday’s high of 113-15+. Resistance is seen at 113-18 (Jun 15 high) whilst bear trigger support is seen at 112-12 (Jun 14 low).
- Data: Dallas Fed Mfg Activity Jun (1030ET)
- Note/bond issuance: US Tsy $42B 2Y Note auction (91282CHL8) - 1300ET
- Bill issuance: US Tsy $65B 13W, $58B 26W bill auctions - 1130ET
