TREASURY WRAP: T-NOTE (M4) FUTURES SETTLE 6 TICKS LOWER AT 108-26+

Analysis details (20:33)

Treasuries saw modest selling on Wednesday in light trade with contracts pinned in post-NFP ranges; 10yr auction was average.  At settlement, 2s +1.7bps at 4.845%, 3s +2.5bps at 4.658%, 5s +3.3bps at 4.504%, 7s +3.5bps at 4.497%, 10s +3.7bps at 4.498%, 20s +3.5bps at 4.739%, 30s +3.6bps at 4.641%.

INFLATION BREAKEVENS: 5yr BEI +1.9bps at 2.337%, 10yr BEI +1.3bps at 2.333%, 30yr BEI +1.2bps at 2.335%.

THE DAY: T-Notes drifted to a session peak of 109-03 at the APAC handover before better selling kicked in. There was a weak 10yr JGB auction in addition to BoJ's Ueda indicating the weak Yen could result in a BoJ policy response having previously said otherwise. 108-28+ served as support at first before renewed selling in the European morning saw new lows, with contracts ultimately hitting troughs for the session at 108-25+ in the NY morning with catalysts on the light side ahead of supply; there were a few more corporate debt deals too. Contracts traded in tight ranges for the rest of the US session with little reaction to the average 10yr auction.

Looking ahead, the week is on the light side for data with Thursday's jobless claims and Friday's initial Michigan survey the US highlights, although traders are casting more attention to next week's inflation data (PPI Tuesday and CPI Wednesday). This Thursday's 30yr offering remains the last auction hurdle of the week with no US coupon supply next week. On Fed Speak: [Thurs] Daly (v), [Fri] Bowman (v), Logan (nv), Goolsbee (v), Barr (v), [Mon] Jefferson (v), Mester (v), [Tues] Powell. Globally, Thursday's BoE will be the focus this week.

10YR AUCTION: An average 10yr new issue auction from the Treasury but perhaps a bit flat vs some of the bullish enthusiasm post-Powell and NFP. USD 42bln of notes were sold at 4.483%, more expensive than last month's 4.56%, but still closer to the highs of the year (4.74%) than the lows (3.82%). The auction tailed the When Issued yield by 1bp, which is in line with the six-auction average and much better than last month's 3.1bp tail, but hardly indicative of exuberant demand. Dealers were left with 15.7%, much less than the prior 24% and beneath the average 16.9%, with both Directs and Indirects seeing a step up in takedown from last month. The USD 25bln 30yr auction on Thursday remains the last auction hurdle for a while with no US coupon auctions next week.

STIRS: 

• SR3M4 +0.0bps at 94.705, U4 +0.0bps at 94.890, Z4 -0.5bps at 95.120, H5 -2.0bps at 95.360, M5 -3.0bps at 95.565, U5 -3.5bps at 95.735, Z5 -3.5bps at 95.855, H6 -4.0bps at 95.935, M6 -4.0bps at 95.985, M7 -4.5bps at 96.095, M8 -4.5bps at 96.085.


• SOFR at 5.31% (prev. 5.31%), volumes at USD 1.864tln (prev. 1.855tln).


• NY Fed RRP op demand at USD 0.493tln (prev. 0.475tln) across 74 counterparties (prev. 73).


• EFFR at 5.33% (prev. 5.33%), volumes at USD 78bln (prev. 75bln).


• US sold USD 60bln of 17-week bills at 5.240%, covered 3.04x.

08 May 2024 - 20:33- Fixed IncomeData- Source: Newsquawk