TREASURY WRAP: T-NOTE (M4) FUTURES SETTLE 7 TICKS LOWER AT 107-21+

Analysis details (20:59)

Treasuries were sold on Tuesday after top Fed officials pushed back on rate cuts. 2s +4.1bps at 4.979%, 3s +4.8bps at 4.834%, 5s +5.3bps at 4.698%, 7s +5.1bps at 4.697%, 10s +4.8bps at 4.676%, 20s +3.8bps at 4.896%, 30s +3.6bps at 4.776%.

INFLATION BREAKEVENS: 5yr BEI -0.4bps at 2.495%, 10yr BEI -0.8bps at 2.429%, 30yr BEI -0.1bps at 2.366%.

THE DAY: After Monday's recovery from the post-retail sales low, T-Notes extended their geopolitical risk-infused bid into the Tokyo handover for the Tuesday session, peaking at 108-04. However, there was little appetite to extend the bid through the APAC session, although a strong demand reception at the BoJ's long-end auction taps provided a floor out of JGBs. Chinese activity data was mixed and led to little broader reaction. Downside gained momentum in the London morning with the hotter-than-expected UK wage growth offsetting the soft employment figures ahead of Wednesday's CPI. The hot German ZEW survey kept the bearish pressure on out of EGBs also later in the European morning. 

T-Notes found a partial bid on the soft CAD CPI and US housing starts/permits figures, but extended lower again after Fed Vice Chair Jefferson removed references to rate cuts in a speech. T-Notes printed session lows of 107-13+ right after Powell, at an event with BoC's Macklem, also removed references to rate cuts saying inflation is "taking longer than expected" to hit target. However, contracts struggled to extend lower from there. 

The rest of the week is laden with appearances from other Fed officials. Meanwhile, we still have a healthy slew of economic data, including Beige Book on Wednesday, Philly Fed, IJC, and existing home sales on Thursday, with a quiet Friday to give set up for next week's 2s, 5s, and 7s auctions. But before then, Wednesday's 20yr bond auction will serve as a litmus test for dip buying after recent fixed income weakness, followed by the 5yr TIPS auction on Thursday. 

THIS WEEK'S AUCTIONS: US to sell USD 13bln of 20yr bonds (reopening) on April 17th and USD 23bln of 5yr TIPS new issue on April 18th; all to settle on April 30th.

STIRS: 

• SR3M4 -1.5bps at 94.735, U4 -1bp at 94.895, Z4 -1bp at 95.08, H5 -2bps at 95.26, M5 -4bps at 95.42, U5 -6bps at 95.555, Z5 -7bp at 95.655, H6 -7bps at 95.725, M6 -6bps at 95.78, M7 -5bps at 95.90, M8 -5bps at 95.90.


• SOFR at 5.32% (prev. 5.31%), volumes at USD 1.938tln (prev. 1.805tln)


• NY Fed RRP op demand at USD 0.372tln (prev. 0.327tln) across 68 counterparties (prev. 62)


• EFFR at 5.33% (prev. 5.33%), volumes at USD 83bln (prev. 88bln)​


• US sold USD 65bln of 42-day CMBs at 5.285%, covered 2.79x; sold USD 49bln of 1yr bills at 4.915%, covered 2.88x


• 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 18th and 17-week bills on April 17th; all to settle on April 23rd

16 Apr 2024 - 20:59- Fixed IncomeData- Source: Newsquawk