US STOCKS: The Unloved Rally Extends

TYM5 is dealing at 109-28+, +0-05 from closing levels in today's Asia-Pac session. 

• The 10-year yield closed around 4.495 on Friday night and has opened just below at 4.48% this morning in Asia.
• The 10-year yield rose almost 50bps in 5 days, one of the biggest moves in that number of days since 1998.
• Ultimately though it comes down to the market pricing in a large number of cuts and the Fed consistently saying it was worried about inflation due to the President’s policies.
• Bianco Research made a good point over the weekend. “The market understands Powell is going “Volcker” and is not going to cut rates despite a weakening economy”. (per X via BBG)
• He wants to be remembered as central bank royalty like Paul Volker who was known for his decisive and aggressive stance to curb inflation, rather than Arthur Burns who was criticized for being too slow and hesitant to raise rates.
• Yields will continue to find sellers on dips. Expect any move back towards the 4.25-4.35% area to find supply.
• The key resistance back towards 4.8-5% is the first target. The market will be watching for more stress in the leveraged basis-trade unwind and any signs of sovereign selling. 

JGB futures are stronger, +3 compared to settlement levels, but weaker than Friday's post-Tokyo trade closing level. 

• US 10-year futures (TYM5) are dealing at 109-29, +0-06 from closing levels in today's Asia-Pac session.
• The big news over the weekend was President Trump's exemptions on smartphones, computers, and other electronics, though this has been downplayed over the weekend as a procedural step. They will be looking at the whole electronic supply chain.
• On Friday, 10-year yields ranged from 4.5270% to 4.5860%, closing around 4.49%. The 10-year yield rose almost 50bps in 5 days, one of the biggest moves over that number of days since 1998. Several catalysts are being pointed at: hedge funds, basis - traders being squeezed out, and sovereign selling of treasuries as a negotiation tool. These have all added to the pressure.
• There had been some speculation that the BoJ had been a seller of treasuries adding to the messy price action. The LDP policy chief has come out saying its US treasury holdings will not be used as leverage in tariff talks scheduled for April 17.
• Cash JGBs are showing a bear-steepener in early Tokyo trade.
• Today, the local calendar will see Industrial Production and Capacity Utilization data.
• BoJ Governor Ueda is due in parliament at 1109 JT.

ACGBs (YM -8.0 & XM -4.5) are weaker following a heavy end to last week for US tsys. On Friday, US tsys finished cheaper, with curves flatter. 

• The big news over the weekend was President Trump's exemptions on smartphones, computers, and other electronics, though this has been downplayed over the weekend as a procedural step. They will be looking at the whole electronic supply chain.
• US 10-year futures (TYM5) are dealing at 109-26, +0-03 from closing levels in today's Asia-Pac session.
• On Friday, US tsy futures moved off lows after lower-than-expected PPI (prior up-revised slightly). UofM sentiment was lower than expected but anticipated inflation expectations were higher.
• Cash ACGBs are 5-8bps cheaper with the AU-US 10-year yield differential at -5bps.
• Swap rates are 3-9bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -3 to -9.
• RBA-dated OIS pricing is 2-13bps firmer across meetings today. A 50bp rate cut in May is given a 39% probability, with a cumulative 116bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Today, the local calendar will be empty, ahead of the release of the RBA Minutes for the April Meeting tomorrow.