US TSYS: Modestly Weaker Having Held Key Round Levels

We sense there may be a sense of disappointment in today's borrowing estimates given Treasury did not lower the quarter-end TGA cash targets, which had been expected by some.

• But the current quarter's borrowing requirements are - excluding the effect of TGA cash rebuild - actually $53B lower than estimated at the last refunding in February (doing the math: the borrowing requirement was revised up by $391B, but the cash increase was also revised up by $444B from zero, so if they didn't have to rebuild the TGA cash pile, the borrowing estimate would have been $53B lower).
• And Jan-March borrowing was $2B lower than had been expected back in February, again when excluding the impact of TGA cash building. And Treasury's press release takes note of both improvements.
• Taking those into account, some of the higher-end analyst estimates for borrowing in this quarter have proved too high, and at least Treasury has confirmed that it sees a slightly stronger fiscal situation in the current quarter - in line with what looks like a strong April tax take.
• That may tilt the balance on Wednesday to "no change" in the guidance that Treasury will keep nominal coupon auction sizes unchanged for “at least the next several quarters”, which would be a positive development for Treasuries.
• This shouldn't greatly change the narrative, but swap spreads have ticked slightly wider in Treasuries' favor in the aftermath of the release, potentially reflecting a bit of optimism heading into Wednesday's refunding announcement.

• RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg  
• RES 3: 0.6528 High Nov 29 ‘24
• RES 2: 0.6471 High Dec 9 ‘24
• RES 1: 0.6439 High Apr 22
• PRICE: 0.6409 @ 16:52 BST Apr 28 
• SUP 1: 0.6344/6302 Low Apr 24 / 50-day EMA  
• SUP 2: 0.6181 Low Apr 11  
• SUP 3: 0.6116 Low Apr 10 
• SUP 4: 0.5915 Low Apr 9 and key support  

AUDUSD is unchanged and remains in consolidation mode for now. A bullish theme remains intact. The pair has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6302, the 50-day EMA. A clear break of this EMA would be a concern for bulls.

Option desks reported mixed flows Monday, SOFR leaning towards upside calls, Treasury options revovled around low delta puts. Underlying futures finishing near late session high (TYM5 at 111-30, +14). as such, projected rate cut pricing has gained momentum vs. morning levels (*) as follows: May'25 at -2.7bp (-1.9bp), Jun'25 at -16.7bp (-15.4bp), Jul'25 at -38.1bp (-35.6bp), Sep'25 -58.7bp (-54.6bp).

• SOFR Options:
  • -4,000 SFRH6/0QH6 98.00 call spds, 0.75 midcurve over
  • -5,000 SFRZ5 95.37/95.50/95.87 1x call flys, 6.25 vs. 96.59/0.17%
  • Block/screen, -12,000 SFRN5 96.50/97.00 call spds, 7.0 ref 92.265
  • -2,000 SFRZ5 98.00/99.00 call spds, 4.5
  • over +40,000 SFRZ5 95.68 puts, 4.0
  • +5,000 SFRZ5 97.25 calls, 15
  • -6,000 0QU5 97.50/98.00 call sppds, 7.0 vs. 95.86/0.10%
  • +30,000 0QU5/0QZ5 97.50/98.00 call spd spd, 2.0 net flattener
  • 6,000 3QK5 96.62/96.87 call spds ref 96.49
  • 1,500 SFRN5 96.31/96.50 call spds ref 96.245
  • 1,250 2QM5 96.81/97.06 call spds ref 96.725
• Treasury Options:
  • 10,000 Wed weekly 111.75/112.25 call spds, 13 ref 111-27.5
  • 1,500 TYM5 110.5 puts vs. 112/113 call spds ref 111-23.5
  • 2,500 TYM5 111.75 straddles, 143 ref 111-24
  • +12,500 TYM5 110.5/111.5 2x1 put spds, 1 net vs 111-17.5/0.10%
  • Block, 7,500 TYM5 110 puts, 20 vs. 111-12.5/0.25%
  • +6,000 TYM5 111 puts, 40 vs. 111-14/0.41%
  • 10,000 TYM5 107 puts, 2 ref 111-13
  • 15,000 TYM5 106/107 put spds
  • over 5,800 TYM5 109 puts 8 last
  • over 5,000 TYM5 109.5/110.5 put spds, 14 ref 111-16
  • 5,900 TYM5 113 calls, 20 ref 111-15.5