US TSYS: Sell-Off Stalls With 10YY Just Shy of 4.40%, 2s10s Steepest Since Jan
Mar-27 10:52
- Treasuries have more than reversed initial gains with the open after growth negative impacts of latest tariff announcements on autos and pharma still to come originally set the tone in Asia trade.
- The intraday sell-off started in European hours but has stabilized with US desks filtering in along with reaching some notable levels.
- Today sees a heavy data docket at 0830ET plus 7Y supply and then Fedspeak later in the session.
- Cash yields are 1.2-4.1bp higher on the day, led by the long end.
- 10Y yields came close to hitting 4.40% for the first time since Feb 24, topping out at 4.3984% and currently 4.389%).
- 2s10s at 36.2bps (+2.3bp) is at its steepest since Jan 24.
- TYM5 trades at 110-07+ (-10+) off latest lows of 110-06, on solid cumulative volumes of 470k. The low tested support at 110-06 (50-day EMA), after which lies a key 110-00 (Feb 7 high) before 109-13+ (Feb 24 low). Resistance meanwhile is seen at 111-17+ (Mar 20 high).
- Data: GDP/PCE revisions, Q4 third (0830ET), Weekly jobless claims (0830ET), Advance goods trade Feb (0830ET), Wholesale/retail inventories Feb p/Feb (0830ET), Pending home sales Feb (1000ET), KC Fed mfg Mar (1000ET)
- Note that the trade data are likely to see greater attention than usual – more on this here.
- Fedspeak: Barkin (1630ET), Collins (1630ET)
- Coupon issuance: US Tsy $44B 7Y Note auction - 91282CMT5 (1300ET). Yesterday’s 5Y saw a small 0.5bp tail along with its lowest bid-to-cover in nine auctions.
- Bill issuance: US Tsy $75B 4W & 8W bill auctions (1130ET)
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EGBS: Bund Futures Off Highs As Euro Equities Post Intraday Recovery
Feb-25 10:41
This morning’s risk-off/tariff-driven rally in Bund futures extended a little before stalling, with European equity futures having fully recovered from session lows. Futures are -16 ticks at 132.24, up from a session low of 131.87. Initial resistance at 132.60 (Feb 21 high) remains untested for now.
- Short-end rates have rallied alongside core FI, prompting a light twist steepening of the German curve (Schatz yields 1.5bps lower today).
- German Q4 final GDP confirmed flash estimates at -0.2% Q/Q, but details of the reported noted inventories contributed 0.8pp (i.e. domestic demand remains very weak).
- The ECB’s indicator of negotiated wages eased to 4.12% Y/Y in Q4 (vs 5.43% prior, revised from 5.42% initial), but the data is unlikely to be a needle mover for the ECB. Policymakers are more focused on the signals from the bank’s forward-looking wage tracker.
- The 10-year OAT/Bund spread is 1.5bps tighter today at 73bps – we haven’t seen an obvious driver of the outperformance. Other EGB spreads are also biased tighter.
- Today’s conventional supply (BTP Short Term/BTPei and Green Bund) was digested smoothly, while the spread has been set for today’s 15-year Obli syndication.
OUTLOOK: Price Signal Summary - S&P E-Minis Corrective Pullback Extends
Feb-25 10:41
- In the equity space, S&P E-Minis traded lower again, on Monday. The move down appears corrective, however, price has breached support at 6014.00, the Feb 10 low. This signals scope for a deeper retracement and has exposed a key support at 5935.50, the Feb 3 low. Moving average studies remain in a bull-mode condition that suggests the trend direction remains up. A resumption of gains would refocus attention on key resistance at 6178.75, the Dec 6 ‘24 high.
- The trend direction in the EUROSTOXX 50 futures contract remains up and last week’s climb to a new alltime high on the continuation contract, reinforces a bull theme. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 5574.57 next, a 2.382 projection of the Nov 21 - Dec 9 - 20 ‘24 price swing. Initial firm support to watch is 5387.59, the 20-day EMA. A pullback would be considered corrective.
GERMAN AUCTION RESULTS: 1.80% Aug-53 Green Bund
Feb-25 10:32
| 1.80% Aug-53 Green Bund* | Previous | |
| ISIN | DE0001030757 | DE0001030724 |
| Total sold | E1.5bln | E500mln |
| Allotted | E1.495bln | E485mln |
| Avg yield | 2.73% | 2.41% |
| Bid-to-offer | 2.34x | 2.64x |
| Bid-to-cover | 2.35x | 2.72x |
| Average Price | 81.78 | 54.00 |
| Low acc. Price | 81.77 | 54.00 |
| Pre-auction mid | 81.646 | 53.925 |
| Previous date | 10-Sep-24 |
