SONIA: Put Ladder buyer

Wrightson ICAP provide a few observations around last week’s UST selloff: 

• Basis trades: ICAP note that the latest CFTC report “did not provide any superficial evidence of large-scale basis trade liquidations as of Tuesday, April 8”. However, they note that “in a turbulent market, the aggregate data in the chart below can mask massive shifts in individual portfolios” and that “importantly, they also don’t tell us anything about deleveraging in other popular trades such as swaps-spread positions”.
• Congestion In the UST Market: “Trading volume in Treasury securities exploded in response to Wednesday’s tariff U-turn, with volume in on-the-run coupons surging to $1.8 trillion in the April 9 TRACE data – nearly three times the daily average volume in the first quarter”…”While this surge once again focused attention on concerns that the market’s intermediation capacity has not kept pace with the growth in the overall Treasury market, Fed officials noted that the market’s infrastructure was ”strained but functioning”".
• Signals from Buyback Results: “The results of last week’s Treasury buyback operations did not appear to indicate an urgent need for an official-sector buyer of last resort at this point”….” We’ll be especially interested to see the results of the Treasury liquidity support operation in the 5- to 7-year nominal sector that is scheduled for this Tuesday”.
• Morning SRF Operations:  “It probably would have been useful if that [morning SRF operations] option had been available to dealers last week – especially during the funding tightness on the morning of April 9. That said, we think the Fed was wise not to rush them back into place on an ad hoc basis last week”.  

A short-term reversal in S&P E-Minis last week highlights the start of what appears to be a corrective cycle. The trend condition has been oversold following recent weakness and the move higher is allowing this set-up to unwind. Eurostoxx 50 futures traded in an extremely volatile manner last week and rallied sharply higher from recent lows. The climb highlights the start of a corrective cycle.

• Japan's NIKKEI closed higher by 396.78 pts or +1.18% at 33982.36 and the TOPIX ended 21.6 pts higher or +0.88% at 2488.51.
• Elsewhere, in China the SHANGHAI closed higher by 24.581 pts or +0.76% at 3262.808 and the HANG SENG ended 502.71 pts higher or +2.4% at 21417.4.
• Across Europe, Germany's DAX trades higher by 496.08 pts or +2.43% at 20871.52, FTSE 100 higher by 151.38 pts or +1.9% at 8116.64, CAC 40 up 146.37 pts or +2.06% at 7252.36 and Euro Stoxx 50 up 105.65 pts or +2.21% at 4894.76.
• Dow Jones mini up 397 pts or +0.98% at 40785, S&P 500 mini up 79 pts or +1.47% at 5471, NASDAQ mini up 333.25 pts or +1.77% at 19144.5.

The trend condition in Gold remains bullish and last week’s rally confirms and reinforces this condition. The yellow metal has traded through $3167.8, the Apr 3 high, to resume the primary uptrend and trade to fresh all-time highs. A bearish theme in WTI futures remains intact and last Wednesday's rally is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of several important support levels.

• WTI Crude up $0.14 or +0.23% at $61.59
• Natural Gas down $0.06 or -1.7% at $3.464
• Gold spot down $13.65 or -0.42% at $3223.89
• Copper up $3.05 or +0.67% at $455.35
• Silver down $0.02 or -0.07% at $32.2695
• Platinum up $8.18 or +0.86% at $956.57