TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 19 TICKS LOWER AT 111-15

Analysis details (20:59)

T-Notes chopped to volatile trade dynamics and two-way risk sentiment; 3yr auction was weak. At settlement, 2s -6.0bps at 3.678%, 3s -3.3bps at 3.707%, 5s +2.0bps at 3.862%, 7s +5.6bps at 4.041%, 10s +8.4bps at 4.241%, 20s +13.1bps at 4.759%, 30s +11.8bps at 4.712%

INFLATION BREAKEVENS: 5yr BEI +2.1bps at 2.294%, 10yr BEI +0.7bps at 2.207%, 30yr BEI +1.4bps at 2.182%.

THE DAY: T-Notes chopped with the curve steepening as ongoing volatility in markets continued as participants' ongoing trade updates. T-Notes saw a gradual bid overnight to peak in the European morning at a peak of 112-08, although as risk sentiment improved through Europe, it weighed on T-Notes to see a fresh low of 111-08. Supporting the move was a post on Truth from US President Trump that China wants to make a deal but does not know how to do it, saying "It will happen!". Officials had also been doing the rounds on business television talking about all the countries wanting to make deals. The majority of this downside reversed as sentiment soured once again after the US open as it became apparent that reciprocal tariffs are looking like they are set to take effect tonight as planned, upsetting those potentially bracing for some sort of delay. Many officials have stated countries are reaching out for deals, but these tariffs are not a negotiating tactic and they are set to be implemented tonight. The White House Press secretary also confirmed that China has missed the deadline to remove its tit-for-tat tariffs on the US, therefore the additional 50% tariffs on China will be implemented tonight (taking the total import on goods to 104%). This accelerated the risk off with stocks ending the session around lows but T-Notes were more choppy, seeing upside back to c. 112-00 as sentiment soured. However, T-Notes then reversed after a weak 3yr-T-note auction to settle at 111-15, but with stocks pushing even lower into the close (ES back beneath 5k briefly), T-Notes were initially bid post settlement but failed to hold heading into the closing bell.

SUPPLY:

US Treasury sold:

• USD 58bln of 3yr notes at a high yield of 3.784%, below the prior 3.908% and tailing the WI by 2.4bps, a larger tail than the prior 0.6bps and six auction average of a 0.4bps tail - showing worse demand at the April offering when compared to both the March supply and six auction average. The Bid-to-Cover was also soft at 2.47x (prev. 2.7x, average 2.62x). The breakdown saw direct demand plummet to just 6.2% from 26%, although indirect bidders helped pick up the slack, rising to 73% from 62.5%, although it was not enough to completely offset the weak direct demand as dealers took home an above average and prior 20.7%. Overall, a weak 3yr auction.


• USD 70bln of 6wk bills at a high rate of 4.265%, B/C 2.83x

US Treasury to sell:

• USD 39bln of 10yr notes on April 9th


• USD 22bln of 30yr bonds on April 10th


• USD 60bln of 17wk bills on April 9th


• USD 75bln of 8wk bills on April 10th


• USD 85bln of 4wk bills on April 10th

STIRS/OPERATIONS:

• 
  Market Implied Fed Rate Cut Pricing: May 14bps (prev. 10bps), June 41bps (prev. 34bps), July 64bps (prev. 55bps), Dec 107bps (prev. 95bps)


• NY Fed RRP op demand at USD 157bln (prev. 148bln) across 34 counterparties (prev. 30)


• SOFR at 4.33% (prev. 4.35%), volumes at USD 2.630tln (prev. 2.587tln).


• EFFR at 4.33% (prev. 4.33%), volumes at USD 93bln (prev. 95bln).

08 Apr 2025 - 20:59- ForexResearch Sheet- Source: Newsquawk