US TSYS: TYA Probes Resistance In Extension Of Trump Softening Powell Stance
Apr-23 10:54
- Treasuries are firmly twist flatter, with the majority of moves coming at the open after President Trump said he had no intention of firing Fed Chair Powell.
- It helps build on the broader improvement in risk seen with a softened stance around China trade.
- Long-end gains have extended over the past hour as US desks filter in, with Treasuries continuing their recent relationship of firming amidst risk-on as deleveraging pressures dissipate.
- Cash yields are 2.5bp higher (2s) to 11bp lower (30s).
- 2s10s at 50bp (-8.5bp) for lows since Apr 17 vs a high of over 66bp on Monday.
- 5s30s at 80.6bp (-8.2bp) for lows since Apr 16 vs a high of 97bp on Monday.
- TYM5 has recently touched session highs of 111-04 (+10+) on decent cumulative volumes of 415k.
- It has cleared resistance at 111-00+ (20-day EMA) after which lies 111-17+ (Apr 16 high). Gains are still deemed corrective from a technical angle, with a firmer resistance level at 111-25 (50% retrace of Apr 7-11 bear leg) watched.
- Data: MBA mortgages (0700ET), S&P Global US mfg & serv PMI Apr flash (0945ET), New home sales Mar (1000ET)
- Fedspeak: Goolsbee (0900ET), Musalem (0930ET), Waller (0935ET), Musalem (1435ET), Hammack (1830ET) – see STIR bullet
- Coupon issuance: US Tsy $30B 2Y FRN (1130ET), $70B 5Y Note auction - 91282CMZ1 (1300ET)
- Bill issuance: US Tsy $60B 17W bill auctions (1130ET)
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EGB FUNDING UPDATE: Germany planning to issue 7-year Bund in H2
Mar-24 10:52
- Despite announcing today that there are no changes to the Q2 outlook (outside the usual confirmation of one line for each of the 15/30-year auctions), the DFA has acknowledged that funding needs are likely to be higher than previously anticipated in H2 - due to the increase in defence and infrastructure spending.
- As we suspected, funding needs through the rest of Q2 are to be met via cash reserves (even if defence or infrastructure spending picks up ahead of Q3).
- The DFA also noted that it is planning to resume issuing in the 7-year segment in H2. The 7-year segment has been used on and off by the DFA over the past few years: between May-Sep 2020, Apr-Nov 2021, Oct 2022 - Sep 2024. E15bln was issued in the 7-year segment in 2024 and there had been no issuance planned in the segment this year.
- MNI estimates that there will be a new 7-year Bund maturing 15 November 2032 and pencil in a July launch with a E4bln launch auction and then reopenings of E3-4bln.
- We don't at this stage have a strong view on other changes to auction sizes / additional auctions from Q3 onwards. This will largely depend on how quickly additional spending is brought online.
US TSY FUTURES: Mix Of Positioning Swings Seen Friday
Mar-24 10:48
OI data points to a mix of net long setting (TU), short setting (UXY & US) and long cover (TY & WN) during Friday’s twist steepening of the Tsy futures curve.
- It is hard to give any real inference for positioning movement in FV futures, as the contract was unchanged on the day come settlement.
| 21-Mar-25 | 20-Mar-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 3,839,181 | 3,821,100 | +18,081 | +702,247 |
FV | 6,316,645 | 6,277,903 | +38,742 | +1,689,793 |
TY | 4,920,346 | 4,932,732 | -12,386 | -807,498 |
UXY | 2,281,444 | 2,275,511 | +5,933 | +529,141 |
US | 1,806,435 | 1,789,344 | +17,091 | +2,231,987 |
WN | 1,775,295 | 1,785,073 | -9,778 | -1,904,868 |
|
| Total | +57,683 | +2,440,802 |
STIR: Bostic and Non-Supervision Barr To Add To Post-FOMC Fedspeak
Mar-24 10:46
- Fed Funds implied rates hold most of their push higher from Friday’s close on WSJ weekend reporting that the White House is narrowing its approach to tariffs set to take effect on April 2.
- They still however clearly see the dovish impact from last week’s FOMC decision and communications – see table for comparison.
- Cumulative cuts from 4.33% effective: 5.5bp May, 20bp Jun, 32bp Jul, 47bp Sep and 68bp Dec.
- Flash PMIs for March headline the US docket today, following mixed initial results for the Eurozone (mfg beat, services miss) and the UK (mfg miss, services beat).
- Post-FOMC Fedspeak slowly builds, with Atlanta Fed’s Bostic (non-voter) set to speak on BBG TV at 1345ET before Gov. Barr (permanent voter) on small business lending at 1510ET (text + Q&A).
- Released on the morning of last week’s FOMC decision, the Atlanta Fed’s BIE showed the highest year-ahead inflation expectations since Nov 2023 at 2.5% (+0.2pp from Feb, +0.5pp from the 2.0% low late last year). Bostic had previously stated his core view that the Fed would cut 50bp this year - in line with the median - but in February he also cited disinflationary progress in the BIE as a reason for optimism: "Taken as a whole, recent inflation data have supplied evidence for both optimism and pessimism. On the positive side, longer-term inflation expectations, typically a guide to future inflation, are mostly at healthy levels. To cite one gauge, the Atlanta Fed Business Inflation Expectations survey from December found that, for the first time in four years, respondents on average expect unit costs will rise just 2 percent over the next 12 months. That is in line with where that measure hovered during the low-inflation years before the pandemic."
- We’ll watch to see if Bostic, who usually is quite forthcoming with his dot plot estimates, gives further color here after a hawkish tilt to the distribution of the dot plot even if medians were unchanged.
- Barr will also be watched for greater commentary around monetary policy matters, having stepped down as Vice Chair for Supervision on Feb 28.
