US TSYS: Steepening Extends; Trump Bill Vote Before Claims and PMIs
May-22 10:49
- Treasuries have extended yesterday’s steepening, with the front end to belly firming (aided by -1.6% declines in WTI) but the long end consolidating yesterday’s sell-off.
- A weak 20Y auction, with a 1.2bp tail and a bid-to-cover falling to a low end of the range 2.46x after 2.63x prior, sparked a sharp sell-off with 30Y yields punching above the week’s earlier ytd highs.
- Today sees immediate focus on the passing of President Trump’s “big, beautiful bill”. The package is expected to pass after pressure from Trump and House Republican leadership yesterday won over hardline GOP conservatives who threatened to tank the bill, citing concerns over the deficit implications of the package.
- If the bill is passed, it will be handed to the Senate for the next stage of the process. Senate Majority Leader John Thune (R-SD) has said he wants to send the package to Trump's desk by July 4.
- Later on sees weekly jobless claims - covering a payrolls reference period for initial claims - and flash May PMIs. A 10Y TIPS auction is unlikely to elicit the same reaction as yesterday’s 20Y but weakness could still be of note.
- Cash yields are 0.6-2.5bp lower, with declines led by 5s and with 30s lagging. 30Y yields at 5.086% after 5.1072% overnight, a level that prior to Oct-Nov 2023 was last seen in 2007.
- 5s30s at 94.8bp having touched 96bp overnight in a move back closer to ytd highs of 100bps on May 1.
- TYM5 sits at 109-19+ (+03+) after yesterday’s clearance of 109-18+ (May 15 low), on solid cumulative volumes of 445k.
- The 109-13 overnight marked the latest step towards a key support at 109-08 (Apr 11 low). Resistance meanwhile is seen at 110-21+ (May 16 high).
- Data: Jobless claims (0830ET), Chicago Fed national activity Apr (0830ET), S&P Global US PMIs May prelim (0945ET), Existing home sales Apr (1000ET), KC Fed mfg index May (1100ET)
- Fedspeak: Barkin (0800ET), Williams (1400ET) – see STIR bullet.
- Coupon issuance: US Tsy $18B 10Y TIPS re-open auction (1300ET)
- Bill issuance: US Tsy $85B 4W & $75B 8W bill auctions (1130ET)
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US TSY FUTURES: BLOCK: Jun'25 10Y Ultra Bond
Apr-22 10:43
- 2,463 UXYM5 112-18, may be a sale with a fair amount of two-way trade at the post time of 0625:10ET, DV01 $218,000. The contract trades 112-17.5 (-8.5) last
STIR: Senior FOMC Officials In The Spotlight
Apr-22 10:37
- Fed Funds implied rates sit within yesterday’s Easter Monday holiday-thinned ranges as markets assess the latest of US President Trump’s attempts at pressuring the Fed to cut interest rates.
- Cumulative cuts from 4.33% effective: 3.5bp May, 18.5bp Jun, 41bp Jul, 60bp Sep and 91bp Dec.
- Yesterday’s timely MNI policy team exclusive with Lev Menand looked at options away from just Fed Chair Powell’s role (see Fed Independence Facing Imminent Risk – Menand, published 1613ET).
- That sees today’s various scheduled Fedspeakers in particular focus in an another quiet data docket, with messages either of continued caution against cutting rates too soon or a more dovish tone both of note. We imagine permanent voters Jefferson and Kugler will be watched most closely, although Kugler is late on.
- 0900ET – Vice Chair Jefferson (permanent voter) on economic mobility and the dual mandate (text only). He said Apr 3 that there was no need to hurry to adjust rates and that is was crucial to assess the full effect of Trump administration changes. That said, he noted growth was solid but saw signs of slowing and that persistent uncertainty may constrain the economy.
- 0930ET – Harker (retiring June) on economic mobility and regional economies (fireside chat)
- 1340ET – Kashkari (’26 voter) at Chamber of Commerce Global Summit (Q&A only)
- 1430ET – Barkin (non-voter) fireside chat at innovation summit (Q&A only)
- 1800ET – Gov. Kugler (permanent voter) on monetary policy transmission (text + Q&A). She said Apr 7 that inflation was now the more pressing issue with regards to tariffs and that the Fed needs to make sure it doesn’t rise. She warned the tariff impact should be consequential.
OUTLOOK: Price Signal Summary - Bull Cycle In Gold Remains In Play
Apr-22 10:36
- On the commodity front, the trend needle in Gold continues to point north and this week’s fresh cycle highs confirm a resumption of the primary uptrend. The yellow metal has traded to another fresh all-time high. Note too that moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3547.9, the 1.764 projection of the Feb 28 - Apr 3 - Apr 7 price swing. Initial firm support lies at 3163.5, the 20-day EMA. First support is $3331.5, the Apr 21 low.
- In the oil space, a bearish theme in WTI futures remains intact and the recovery since Apr 9 is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels, reinforcing a bearish threat. A resumption of the bear cycle would open $53.72, a 2.236 projection of the Feb 20 - Mar 5 - Apr 2 price swing. Initial firm resistance is seen at $64.49, the Mar 5 low and a recent breakout level. The 50-day EMA is at $66.22.
