RUSSIA: RTRS-Putin's Demands For Peace-All Of Donbas, No NATO, No Western Troops
Reuters reports that as part of any peace deal with Ukraine, Russian President Vladimir Putin has four key demands of Kyiv: a full ceding of the Donbas, a formal renunciation of ambitions to join NATO, a commitment to neutrality, and no Western peacekeepers on Ukrainian soil. Reuters reports that the Russians view this as a compromise, as Moscow would only take the areas of Kherson and Zaporizhzhia currently under the control of their forces, rather than the entire oblasts.
- Reuters: "Russia controls about 88% of the Donbas and 73% of Zaporizhzhia and Kherson, according to U.S. estimates and open-source data. Moscow is also willing to hand over the small parts of the Kharkiv, Sumy, and Dnipropetrovsk regions of Ukraine [in the north of the country] it controls as part of a possible deal..."
- The remaining 12% of the Donbas not held by Russia form the heavily defended 'fortress cities'. If Russia sought to take this area, as well as the remaining sections of Kherson and Zaporizhzhia, the British Ministry of Defence estimates it could take 4.4 years and result in 1.93mln Russian casualties (killed and wounded).
- The article notes comments from Ukrainian President Volodymyr Zelenskyy who said earlier today, "If we're talking about simply withdrawing from the east, we cannot do that. It is a matter of our country's survival, involving the strongest defensive lines." If the 'fortress cities' were handed to Russia, it would mean little standing in the way between Russian forces and Kyiv.
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US TSYS/SUPPLY: Treasury Ups Bill Sizes Again As Cash Rebuild Picks Up Pace
Treasury continued to up the size of 4- and 8-week bills, rising $5B apiece for Thursday's auctions to $95B and $85B, respectively. The new 4-week level will match the all-time largest auctions seen over the last couple of years, with 8-weeks remaining below the $90B peak.
- This is the 3rd consecutive weekly increase - they're up from $55B/$45B at the beginning of the month, prior to the lifting of the debt limit. 17-week auction sizes were unchanged at $65B.
- The increase is something of a surprise (Wrightson ICAP this morning wrote "We think the Treasury has completed its current ramp-up of bill offering sizes"), in a possible sign that Treasury is not necessarily going to back-load its rebuild of the Treasury General Account post-debt limit: it said after the debt limit was lifted that it is aiming for a cash balance of $500B by end-July (vs $315B at end-last week) and $850B by end-September.
- Upon settlement next Tuesday, the bills will raise $60B in net cash.
- We expect to hear a little more about cash management plans in next week's Refunding round. For the foreseeable future, bills are going to be the moving part in meeting financing requirements, with coupon auction sizes not expected to be increased for several quarters at least. We'll publish our Refunding preview later this week.
US 10YR FUTURE TECHS: (U5) Monitoring Resistance
- RES 4: 112-15 61.8% retracement of the Apr 7 - 11 sell-off
- RES 3: 112-12+ High Jul 1 and a bull trigger
- RES 2: 111-28 High Jul 3
- RES 1: 111-13+ High Jul 21 & Jul 10
- PRICE: 111-11+ @ 16:10 BST Jul 22
- SUP 1: 110-08+ Low Jul 14 & 16
- SUP 2: 110-03 76.4% retracement of the May 22 - Jul 1 bull leg
- SUP 3: 109-28 Low Jun 6 and 11
- SUP 4: 109.25 Low May 27
Treasury futures traded higher again Tuesday, extending the firm start to the week. The move higher has resulted in a break of the 20-day EMA, strengthening the recovery, and markets have met resistance at 111-13+, the Jul 10 high. A clear break of this hurdle would highlight a stronger reversal. Key support lies at 110-08+, the low on Jul 14 and 16. A move through this support would reinstate the recent bearish theme.
BELGIUM AUCTION PREVIEW: On offer next week
Belgium will look to sell the following OLOs at its auction next Monday, with the target size set to be announced on Friday:
- the 2.60% Oct-30 OLO
- the 3.10% Jun-35 OLO
- the 3.50% Jun-55 OLO
