BTP TECHS: (U5) Monitoring Support

• MNI: US MBA: MARKET COMPOSITE +12.5% SA THRU JUN 06 WK

• Treasuries are bear steeper as they extend yesterday’s post-1000ET sell-off, with CPI in focus (MNI Preview) before 10Y supply. For the latter, long-end pressures are less acute than has been the case in previous months but it will nevertheless mark an important test of duration demand.
• A federal appeals court yesterday extended a short-term reprieve for the Trump Administration as it challenges last month’s trade court ruling that blocked tariffs. Trump has just now described this as a “great and important win for the US”.
• Today’s China statement after a conclusion of US-China talks offered nothing concrete. It urged dispute resolution via dialog, vowed to reduce the misunderstanding and promoted the long-term development of China-US ties.
• Cash yields are 1-4bp higher, with increases led by 20s and 30s.
• The modest steepening sees curves lift a little further off what had been flats for recent weeks, including 2s10s at 47.5bp (+1.9bp) and 5s30s at 86.5bp (+2bp).
• TYU5 has recently touched a session low of 110-00+ (- 06) on another overnight session with light volumes, currently at 240k.
• It extends a pullback off yesterday’s high of 110-14 having stopped short of testing 110-19+ (50-day EMA). A bearish threat is still present, with support at 109-26 (May 29 low) before a bear trigger at 109-12+ (May 22 low).
• Data: CPI May (0830ET), Real av earnings May (0830ET), Federal budget balance May (1400ET)
• Coupon issuance: US Tsy $39B 10Y Note re-open - 91282CNC1 (1300ET). Last month’s 10Y saw a strong 1.3bp stop through but with weaker details than the previous auction.
• Bill issuance: US Tsy $60B 17W bill auction (1130ET)
• Bloomberg reports that HK pensions plan to sell down their Treasury holdings within three months if the US loses its last AAA rating (by Japan’s Rating & Investment Information Inc.) 

• RES 4: 111-30   76.4% retracement of the May 1 - 22 downleg
• RES 3: 111-19+ 1.0% 10-dma envelope
• RES 2: 111-14+ High Jun 5 & 61.8% of the May 1 - 22 downleg
• RES 1: 110-19+ 50-day EMA   
• PRICE:‌‌ 111-02+ @ 11:24 BST Jun 11
• SUP 1: 109-26   Low May 29          
• SUP 2: 109-12+ Low May 22 and the bear trigger 
• SUP 3: 109-09+ Low Apr 11 and key support
• SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing

The recent reversal in Treasury futures undermines a bullish theme and a bear threat remains present. An extension down would expose support at 109-26, the May 29 low, where a break would open key support and the bear trigger, at 109-12+, the May 22 low. Key short-term resistance has been defined at 111-14+, a Fibonacci retracement and the Jun 5 high. Clearance of this hurdle would be bullish. First resistance is 110-19+, the 50-day EMA.