TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 9+ TICKS HIGHER AT 110-30

Analysis details (19:38)

T-notes see two-way price action on US data before moving higher as risk sours. At settlement, 2s -5.0bps at 3.945%, 3s -5.9bps at 3.932%, 5s -5.8bps at 4.019%, 7s -5.6bps at 4.146%, 10s -5.0bps at 4.266%, 20s -4.3bps at 4.619%, 30s -4.1bps at 4.590%

INFLATION BREAKEVENS: 5yr BEI -4.8bps at 2.419%, 10yr BEI -3.1bps at 2.304%, 30yr BEI -2.1bps at 2.237%.

THE DAY: T-notes meandered overnight before selling off in the European morning, with attention turning to the US PPI data. The data was soft on the headline numbers, but when looking into the internals, the components that feed into the PCE report were generally hotter than the prior. Meanwhile, Jobless Claims were beneath analyst expectations. T-notes initially caught a bid on the soft PPI, but this swiftly faded once the details were digested, as well as the sub-forecast jobless claims data. T-notes then went on to hit a low of 110-12 around the US cash equity open. Another downbeat risk sentiment in equity markets reignited the Treasury bid into settlement to reclaim 111-00. A soft 30-year bond auction did little to stop the bid, with US equities continuing to slide. Attention on Friday turns to the UoM Consumer Sentiment survey, with a lot of eyes on inflation expectations as participants digest policies/tariffs from US President Trump. The US President threatened a 200% tariff on European alcohol if they don't immediately revert their 50% tariff on US whisky. 

SUPPLY

30YR: Overall, a weaker-than-average auction. The US Treasury sold USD 22bln of 30-year bonds at a high yield of 4.623%, tailing the when issued by 1.1bps, vs the prior 1.2bps tail and six auction average of a 0.1bps stop through. The bid-to-cover ratio of 2.37x was above the prior 2.33x but beneath the average of 2.46x. The breakdown of demand saw indirects take 60.5% of the auction, beneath the prior and average, while direct demand of 22.7% was above the prior and average. This left dealers with 16.9% of the auction, a touch above the prior but firmly above the average. 

US sold USD 75bln in 4wk bills at high rate of 4.225%, B/C 3.05x; sold USD 75bln in 8wk bills at high rate of 4.220%, B/C 3.04x

Coming up

• US Treasury to sell USD 13bln of 20yr bonds on March 18th


• USD 18bln of 10yr TIPS on March 20th


• USD 76bln of 13wk bills on March 17th


• USD 68bln in 26wk bills on March 18th


• USD 70bln of 6wk bills on March 18th


• USD 48bln of 52wk bills on March 18th

STIRS/OPERATIONS:

• Market Implied Fed Rate Cut Pricing: March 1bps (prev. 0bps), May 10bps (prev. 8bps), June 27bps (prev. 24bps), Dec 74bps (prev. 69bps).


• NY Fed RRP op demand at USD 113bln (prev. 131bln) across 29 counterparties (prev. 35)


• SOFR at 4.31% (prev. 4.32%), volumes at USD 2.489tln (prev. 2.502tln).


• EFFR at 4.33% (prev. 4.33%), volumes at USD 98bln (prev. 97bln).

13 Mar 2025 - 19:38- ForexData- Source: Newsquawk