TREASURY WRAP: T-NOTE (M4) FUTURES SETTLE 7 TICKS HIGHER AT 107-18+

Analysis details (20:30)

Treasuries bull-flattened Friday after the in line March Core PCE calmed nerves ahead of month-end, QRA, and FOMC. 2s +0.4bps at 5.002%, 3s -1.1bps at 4.843%, 5s -2.5bps at 4.692%, 7s -3.4bps at 4.690%, 10s -3.7bps at 4.669%, 20s -4.3bps at 4.899%, 30s -3.6bps at 4.784%.

INFLATION BREAKEVENS: 5yr BEI +0.5bps at 2.457%, 10yr BEI +0.3bps at 2.438%, 30yr BEI +0.7bps at 2.399%.

THE DAY: Treasuries were choppy during APAC trade on Friday, with little reaction to the BoJ's inaction, before finding a bid into the London handover. T-Notes hit interim resistance at 107-18 in what was dressed up as short-covering ahead of the weekend. There was little tier 1 data to dig into ahead of the PCE figures, although ECB Consumer Inflation Expectations survey for March saw the 12-months ahead gauge fall to 3.0% from 3.1%) and the 3-year ahead gauge left unchanged at 2.5%.

The in line March US core PCE of +0.3% M/M saw a kneejerk dovish reaction as the concerns of a 0.4% or even 0.5% print after Thursday's GDP data ultimately did not come to fruition, with T-Notes spiking from 107-14 to session peaks of 107-27+ in an immediate reaction before swiftly paring at least half the move. Contracts remained above pre-data levels for the rest of the session with duration outperforming in what appears to be some month-end-related buying flows after heavy selling earlier in April -  there was particular strength in EGBs and Gilts - and perhaps some positioning into the refunding announcement. However, it's noteworthy that 2yr T-Notes closed the gap lower to pre-data levels, coming ahead of the FOMC next Wednesday where Powell is expected to strike a relatively more hawkish tone after the string of recent hot inflation prints.  

Looking ahead, attention is on Monday's quarterly financing estimates (which led to a rally in USTs last quarter) ahead of Wednesday's Quarterly Refunding Announcement (no changes in coupons expected) and the FOMC with Powell expected to tow a more hawkish line given the data, followed by NFP on Friday. Note that we are entering the month-end period too, so related buying flows will remain a topic of conversation heading into Tuesday after the strong sell-off earlier this month. Elsewhere, flash German inflation data is sure to set the tone on Monday out of EGBs, where Tuesday also sees the release of German retail sales (March) and unemployment numbers (April), with final manufacturing PMIs on Thursday.  

STIRS: 

• SR3M4 -0.5bps at 94.705, U4 -0.5bps at 94.84, Z4 -1bp at 94.995, H5 -1bps at 95.17, M5 -0.5bps at 95.345, U5 flat at 95.50, Z5 +1bp at 95.62, H6 +2bps at 95.705, M6 +2.5bps at 95.76, M7 +4bps at 95.885, M8 +4.5bps at 95.885.


• SOFR at 5.31% (prev. 5.31%), volumes at USD 1.774tln (prev. 1.778tln).


• NY Fed RRP op demand at USD 0.465tln (prev. 0.444tln) across 78 counterparties (prev. 74).


• EFFR at 5.33% (prev. 5.33%), volumes at USD 89bln (prev. 71bln).

26 Apr 2024 - 20:30- Fixed IncomeData- Source: Newsquawk