STIR: Trump Tariff Threats Set The Tone For Day’s Rates Divergence
Feb-27 18:16
- Cross-market rates clearly show the impact from today’s tariff threats from Trump, earlier ‘confirming’ a Mar 4 timeline for tariffs on Canada, Mexico and China, with the latter including an additional 10% tariff on top of the already in place 10%.
- Recall he had yesterday said they would go into effect Apr 2 in what appeared to be a kicking back of the previously proposed March dates.
- Markets are also on watch for supposedly imminent details on EU tariffs after Trump talked on 25% tariffs on cars and “other things”. Speaking to the UK’s Starmer, he’s just repeated that there will reciprocal tariffs on the EU (due Apr 2 per previous report) but no more specific details just yet.
- See the below charts for the discrepancy between the push higher in SOFR yields (up to 4bp higher for 2026 contracts, as tariff comments helped offset mixed but at the margin dovish US data) vs Euribor yields circa 4bps lower for 2026 contracts on the day.
- Canadian sensitivity to tariffs sees CORRA implied yields with similar declines to Euribor through 2025 contracts, less so after that.
- However, there is still a marked difference when comparing yield changes since shortly ahead of Friday’s European close; continued prospects of heavy European defense spending and the broader results of the German election have seen sizeable underperformance for both Euribor and Sonia futures vs SOFR over the week.
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BONDS: MNI Europe Pi: German Contracts Remain Structurally Short/Flat (1/2)
Jan-28 18:16
From our Europe Pi Positioning Analysis (PDF Here)
- German contracts are in flat/short structural positioning.
- Bobl remains in short territory (though previously was "very short"), joining Buxl with the "short" designation.
- Bund has bucked the wider trend, moving to flat from short, while Schatz remains flat. The most recent week saw shorts set and longs reduced.
US TSYS/SUPPLY: Review 7Y Auction: Second Consecutive Stop
Jan-28 18:07
- Tsys futures paring losses (TYH5 currently 108-30.5 last, -6.5) after the $44B 7Y note auction (91282CMC2) stops 0.8bp through with 4.457% high yield vs. WI of 4.465%; bid-to-cover 2.64x vs. 2.76x prior.
- Peripheral stats: Indirect take-up falls back to 67.08% vs. 87.88% in December; Direct take-up rebounds off lat month's record low of 2.84% to 23.06%; Dealers take 9.86% vs. 9.27% prior.
- The next 7Y Treasury auction is tentatively scheduled for February 26
FED: US TSY 7Y NOTE AUCTION: HIGH YLD 4.457%; ALLOTMENT 49.84%
Jan-28 18:02
- US TSY 7Y NOTE AUCTION: HIGH YLD 4.457%; ALLOTMENT 49.84%
- US TSY 7Y NOTE AUCTION: DEALERS TAKE 9.86% OF COMPETITIVES
- US TSY 7Y NOTE AUCTION: DIRECTS TAKE 23.06% OF COMPETITIVES
- US TSY 7Y NOTE AUCTION: INDIRECTS TAKE 67.08% OF COMPETITIVES
- US TSY 7Y AUCTION: BID/CVR 2.64
