OIL PRODUCTS: Oil Products Summary at European Close: Cracks Rise
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US STOCKS: Tech Stabilises After China Story Drives Weakness Post Cash Open
US equities have stabilised somewhat after a spell of weakness since the US cash open. ES1 is now little changed on the session, with Nasdaq down 0.5%. Initial support at 7,411 (Jul 23 low) was untested during the pullback, allowing the trend condition in E-minis to remain bullish.
A touted driver of today's tech weakness has been a sources story from The Information. The piece noted that “A Shanghai-based company has started making immersion deep ultraviolet lithography tools” – underscoring China’s growing competitiveness in the AI space. In Europe, ASML shares are under considerable pressure today.
A move away from session lows for energy benchmarks may have helped stocks away from earlier highs. Although overnight gaps lower in oil and gas have been consolidated, the rhetoric from the Iranian side today has played down meaningful progress on negotiations. Markets remain on headline watch.
US TSYS/SUPPLY: Likely Tsy 2Y Auction Funge - Unscheduled Reopen 5s
- As noted by the US Tsy last week: if today's 2Y auction "results in a high yield in a range of 4.125% through and including 4.249%, the 2-year notes will be considered an additional issue of the outstanding 4-1/8% 5-year notes of Series AB-2028 (CUSIP No. 91282CHQ7) originally issued July 31, 2023."
- Current 2Y WI inside the re-open range at 4.327%
- "The additional issue of notes would have the same CUSIP number as the outstanding notes, which are currently outstanding in the amount of $43,000 million. If the auction results in the issuance of an additional amount of the outstanding 5-year notes rather than a new 2-year note, it will be indicated in the Treasury's auction results press release and by a special announcement. Any net long position reporting in this auction should be in regard to the 2-year notes."
US TSYS/SUPPLY: Preview Early Treasury 2Y Note Auction
Tsy futures hold moderate gains - off recent lows (TUU6 +.88 at 102-24.5 vs. 102-23.62 low; TYU5 currently +5 at 108-15.5 vs. 108-12.5 low) ahead of the $69B 2Y note auction (91282CRB9) at 1130ET -- earlier than usual due to Wednesday's FOMC: with $70B 5Y Note auction (91282CRA1) taking today's 1300ET slot. 2Y WI is currently running at 4.322%, 13.3bp cheap to last month's near in-line sale.
- June recap: Tsy futures holding near top end of the session range after the $69B 2Y note auction (91282CQY0) nearly on the screws for the second consecutive 2Y sale: high yield of 4.189% vs. 4.190% WI; 2.64x bid-to-cover steady to prior (2.62x 5-auction avg).
- Peripheral stats: Indirect take-up to 55.45% from 57.6% prior (58.75% 5-auction avg), directs take-up to 34.31% vs. 30.1% prior (28.16% 5-auction avg), primary dealer take-up to 10.24% vs. 12.3% prior (13.08% 5-auction avg).
| High yield | When-issued yield | Trade through (tail) | High - Median Spread | Bid-to-cover | Primary Dealer Percent | Indirect Percent | Direct Percent | Offering Amount | |
| 5 auction avg | 3.892% | 3.888% | (0.44) | 5.8 | 2.60 | 13.66% | 56.93% | 29.36% | |
| 23-Jun-26 | 4.189% | 4.190% | 0.1 | 5.1 | 2.64 | 10.24% | 55.45% | 34.31% | $69B |
| 26-May-26 | 4.071% | 4.071% | 0.0 | 5.6 | 2.64 | 12.3% | 57.6% | 30.1% | $69B |
| 27-Apr-26 | 3.812% | 3.810% | (0.2) | 6.2 | 2.65 | 11.87% | 56.48% | 31.65% | $69B |
| 24-Mar-26 | 3.936% | 3.917% | (1.9) | 7.1 | 2.44 | 24.12% | 59.38% | 16.50% | $69B |
| 24-Feb-26 | 3.455% | 3.453% | (0.2) | 5.2 | 2.63 | 9.81% | 55.91% | 34.28% | $69B |
