TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 8 TICKS LOWER AT 111-05+

Analysis details (18:10)

At settlement, 2s +1.4bps at 3.800%, 3s +1.4bps at 3.800%, 5s +3.3bps at 3.942%, 7s +4.7bps at 4.125%, 10s +5.2bps at 4.331%, 20s +6.0bps at 4.841%, 30s +6.3bps at 4.810%.

INFLATION BREAKEVENS: 5yr BEI +6.8bps at 2.326%, 10yr BEI +5.2bps at 2.234%, 30yr BEI +4.7bps at 2.204% 

THE DAY: T-Notes gradually sold off overnight as equity futures caught a bid, in an apparent reversal of what was seen post-Fed Chair Powell on Wednesday. T-Notes hit lows of 111-02+ in the European morning, before turning higher, with the timing syncing up with a post from US President Trump calling for Powell to lower rates, adding "Powell's termination cannot come fast enough!" in response to the Fed Chair's wait-and-see approach on Wednesday. However, at the same time, Dow futures were plummeting in wake of dismal UnitedHealth (UNH) earnings report (UNH) were the largest weighted Dow stock, which heavily hit the index, perhaps supporting some haven demand. T-Notes continued to push higher after the US data, seemingly driven by the very downbeat Philly Fed survey. Although the jobless claims data showed the labour market remains robust with the Initial Claims data falling. T-Notes failed to test the overnight highs but sold off in the wake of a soft 5YR TIPS auction. T-Notes did move off the post-auction lows after Trump said he is confident on a trade deal with the EU, and that trade is moving along very well, noting how they will make a good deal with China. On central banks, NY Fed President Williams spoke, but largely echoed Fed Chair Powell. Meanwhile, the ECB cut rates by 25bps and were dovish about the outlook. Attention next week turns to Flash S&P Global PMI data and 2-,5-, and 7-year supply. 

SUPPLY: 

• The US Treasury sold USD 25bln of 5yr TIPS at a high yield of 1.702%, tailing the when issued by 2.2bps. The B/C of 2.28x was better than the prior 2.1x but not as strong as six auction average. Meanwhile, the breakdown of demand saw direct demand at 17.8%, falling from the prior 23.1% but a touch above the six-auction average. Indirect demand rose to 64.2% from 51.4%, but demand was softer than recent averages. This left dealers with 18.1% of the auction, well above the 7.58% six-auction average but below the prior 25%. Overall, a soft auction but better than the December offering.


• The US Treasury sold USD 85bln of 4-wk bills at a high rate of 4.240%, B/C 2.91x; sold USD 75bln of 8-wk bills at a high rate of 4.235%, B/C 2.94x.

US Treasury to sell:

• USD 69bln of 2-year notes on April 22nd, USD 70bln of 5-year notes on April 23rd and USD 44bln of 7-year notes on April 24th; all to settle April 30th (sizes as expected)


• USD 30bln 2-year floating rate notes on April 23, to settle on April 30.


• USD 70bln of 6-week bills on April 22nd.


• USD 76bln in 13wk bills and 68bln of 26-week bills on April 21st.

STIRS/OPERATIONS:

• Market Implied Fed Rate Cut Pricing: May 3bps (prev. 5bps), June 18bps (prev. 20bps), July 38bps (prev. 41bps), Dec 87bps (prev. 91bps).


• NY Fed RRP op demand at USD 59bln (prev. 55bln) across 22 counterparties (prev. 30).


• SOFR at 4.31% (prev. 4.36%), volumes at USD 2.513tln (prev. 2.526tln).


• EFFR at 4.33% (prev. 4.33%), volumes at USD 88bln (prev. 96bln).

17 Apr 2025 - 18:10- ForexData- Source: Newsquawk