OAT: Rabobank: OATs Benefitting From Capital Rotation, Wary Of Sub-65 Vs. Bunds

SOFR futures were subjected to more pronounced OI movement than their Tsy peers on Tuesday, with net long cover seemingly dominating in the whites, before net short cover came to the fore further out the strip. 

Bund futures weakened following a soft 30-year auction, having now unwound ~75% of gains since yesterday's settlement. Futures are +24 ticks at 131.10 at typing, down from a session high of 131.52. Risk sentiment remains soft following overnight concerns around Nvidia’s H20 chip sales in China and fresh Trump tariff rhetoric. A BBG sources piece around US/China trade negotiations has provided some reprieve to equity markets.

• Yesterday’s high at 131.57 provides resistance in Bunds, with the 20-day EMA at 129.84 continuing to provide support.
• German yields are 1-2.5bps lower, with the curve steepening following the auction result. Today's 30-year sale followed a weak Bobl auction yesterday.
• This morning’s soft risk tone generally sees 10-year EGB spreads to Bunds widen. The BTP/Bund spread is up 1.5bps to 119.5bps, but remains comfortably above last week’s close following S&P’s rating upgrade after hours on Friday.
• Spreads have been set at today’s dual tranche 7-year BTP / 30-year BTPei syndication. MNI expects the 7-year size between E7-13bln. Greece also sold E200mln of the 3.875% Mar-29 GGB
• US retail sales data provides the main macro point of interest this afternoon. 

OI data points to fairly non-committal trade on Tuesday, with only modest rounds of net long setting and short cover seen across the curve.

• The only positioning swing that topped $1mn in DV01 equivalent terms came via net short cover in WN futures, which proved enough to tilt the curve-wide bias in the same direction.