SONIA: Ratio Put Spread

 The Treasury's advisory committee (TBAC) appeared to be less convinced this quarter that guidance on future issuance should be changed, apparently because of the recent volatility in Treasury market uncertainty amid an uncertain backdrop: "members were mixed on the value of the forward guidance language. Some members preferred dropping the language altogether, while others felt a shift in the language might be received poorly in light of the meaningful increase in uncertainty around tariffs and the economic outlook."

• In the previous quarter's refunding, TBAC "uniformly encouraged Treasury to consider removing or modifying the forward guidance on nominal coupon and FRN auction sizes that has been in the refunding statement for the past four quarters. Some members preferred dropping the language altogether to reflect the uncertain outlook, though the majority preferred moderating the language at this meeting."
• It may be that the guidance ("anticipates maintaining nominal coupon and FRN auction sizes for at least the next several quarters") has outlived its usefulness, but that Treasury will refrain from changing this communication ecause of market sensitivities to any changes.

• Most major pairs looking through the downtick in risk on the back of the US numbers, however AUD/USD has broken lower, showing through the overnight low to narrow the gap with the more consequential support at 0.6344. The break here of trendline support drawn off the Apr 16 low on the 15-minute candle chart may add to near-term downside momentum, with the currency re-correlating with both equities and the uptick in US yields.
• The e-mini S&P is holding the entirety of the post-data losses, pointing to a lower open on Wall Street of near 1.5% - snapping the six session winning streak for the S&P 500.

• Latest steepener crossed at 0836:35ET, appr DV01 $383,000
  • +5,000 FVM5 109-01.5, post time offer vs. -2,000 WNM5 at 121-12, through 121-14 post time bid
• Jun'25 2Y buy followed:
  • -6,600 TUM5 103-31.62, initial post time bid at 0839:45ET, DV01 $246,000