TREASURY WRAP: T-NOTE (M4) FUTURES SETTLE 12 TICKS HIGHER AT 109-20+

Analysis details (20:50)

Treasuries rallied across the curve on Tuesday in set up for CPI with catalysts light; 3yr auction was poor. At settlement, 2s -4.6bps at 4.743%, 3s -4.6bps at 4.560%, 5s -6.0bps at 4.374%, 7s -6.0bps at 4.375%, 10s -6.2bps at 4.362%, 20s -6.2bps at 4.598%, 30s -5.6bps at 4.497% 

INFLATION BREAKEVENS: 5yr BEI -2.9bps at 2.418%, 10yr BEI -2.0bps at 2.380%, 30yr BEI -1.7bps at 2.320%.

THE DAY: After T-Notes closed at 109-08+ on Monday, contracts drifted to a low of 109-06+ early in APAC Tuesday trade with Kashkari (nv, hawk) on wires reaffirming that the inflation fight is not over. Better duration buying developed through the APAC morning, highlighted by a block 8.8k ZT/5.1k ZN flattener, with 109-13 serving as resistance until later in the European morning; a decent 5yr JGB auction had little follow-through demand. The bid caught momentum during European trade despite no major data to go off. However, there was another 8.8k ZT/5.1k ZN flattener, underscoring the duration bid, while the 20yr UK Gilt auction and 5yr German auctions both saw strong demand. 

Treasuries kept climbing as stateside trade got underway with any set-up for this week's Treasury auctions being offset by steepener unwinds/flatteners into CPI; the early downside in US stocks may have seen some rotation into USTs too. Do note the NFIB index came in on the soft side to little reaction at the time. Otherwise, catalysts remained light during the rest of the NY morning unless barring White House's Brainard on CNBC, who said she expects steady progress on inflation in the coming months. There was some heavy front-end buying flow with a 24k July Fed Funds block that was followed by a massive 75k SOFR Dec block, where the latter was accompanied by strong buying flow across the whole Treasury curve. T-Notes climbed into the afternoon where contracts peaked at 109-22+ ahead of settlement, with the poor 3yr auction (details below) seeing little sustained selling pressure.

3YR AUCTION: A poor USD 58bln 3yr auction from the Treasury, where despite the 25bp+ of cheapening since last month, the 4.548% high yield still marked a 2bp tail of the When Issued yield, worse than the March 1.3bp stop-through and six-auction avg. of on the screws. The 2.50x bid/cover ratio was worse than the prior 2.60x and avg. 2.58x. Dealers (forced surplus buyers) were left with 19.3%, above the prior 14.4% and avg. 18.8%, with a 4.8ppts increase in Directs participation more than offset than the tumble in Indirects participation to 60.3% from 70.0%. The proximity of the March US CPI data on Wednesday will have reduced the allure to step in and buy the front end.

THIS WEEK'S AUCTIONS: US to sell USD 39bln of 10yr notes (reopening) on April 10th and USD 22bln of 30yr bonds (reopening) on April 11th; all to settle on April 15th.

STIRS: 

• SR3M4 +2.0bps at 94.835, U4 +3.0bps at 95.070, Z4 +4.0bps at 95.330, H5 +5.0bps at 95.560, M5 +5.0bps at 95.745, U5 +5.0bps at 95.895, Z5 +5.0bps at 96.005, H6 +5.0bps at 96.080, M6 +5.5bps at 96.135, M7 +6.0bps at 96.235, M8 +6.5bps at 96.200.


• SOFR at 5.31% (prev. 5.32%), volumes at USD 1.807tln (prev. 1.898tln).


• NY Fed RRP op demand at USD 0.442tln (prev. 0.449tln) across 73 counterparties (prev. 74).


• EFFR at 5.33% (prev. 5.33%), volumes at USD 82bln (prev. 88bln).


• US sold USD 65bln of 6-week bills at 5.275%, covered 2.93x.


• US leaves 4-, 8-, and 17-week bill auction sizes unchanged at USD 70bln, 75bln, and 60bln, respectively; 4- and 8-week to be sold on April 11th and 17-week bills on April 10th; all to settle on April 16th.

09 Apr 2024 - 20:50- Fixed IncomeData- Source: Newsquawk