TREASURY WRAP: T-NOTE (U3) FUTURES SETTLE 29 TICKS HIGHER AT 111-04+

Analysis details (20:30)

Treasuries rallied with the belly leading after the softer pace of US job growth catalysed short-covering into the weekend. 2s -10.7bps at 4.789%, 3s -11.8bps at 4.470%, 5s -14.3bps at 4.158%, 7s -14.6bps at 4.112%, 10s -13.5bps at 4.054%, 20s -11.6bps at 4.374%, 30s -9.7bps at 4.207%.

INFLATION BREAKEVENS: 5yr BEI +1.8bps at 2.390%, 10yr BEI +0.4bps at 2.375%, 30yr BEI +0.9bps at 2.344%.

THE DAY: Treasuries were mixed entering the NY session on Friday with the front-end having leaked lower through the APAC and London morning, while the long-end had just a mild bid after paring a bounce in the Tokyo morning. A surge in German factory orders provided some weight to sellers, but otherwise, there were few catalysts for USTs. A lack of further selling in JGBs Friday could have only helped stop the rot in US duration. Albeit, T-Notes lost their support at the July low (110-05) late in the London morning, hovering a few ticks beneath ahead of the US jobs report. 

The NFP miss saw T-Notes (U3) trade choppy at first, jumping from 110-05 to 110-13 immediately before swiftly hitting a low of 109-24, all within a minute. But, as the dust settled, the front end sustained a strong bid that filtered out the curve, with the heavy beat long-end struggling at first to track higher, steepening the curve. The front-end strength petered out later in the NY morning, but the belly strength sustained to become the best-performing part of the curve in the afternoon, while the long end also played catch-up, paring a majority of Thursday's losses. T-Notes ultimately peaked at 111-04 ahead of settlement.

On the week, and taking into account the recovery on Friday, US 2yr yields have fallen 9.7bps, 5yr have fallen 2.1bps, 10yr have risen 9.9bps, and 30yr have risen 18.6bps, with the 30yr yields posting their second largest W/W rise of the year. While in TIPS, 2yr yields have fallen 5.5bps, 5yr have risen 2bps, 10yr have risen 11.5bps, and 30yr have risen 16.3bps.

STIRS:

• SR3U3 +1bps at 94.60, Z3 +3.5bps at 94.655, H4 +6.5bps at 94.925, M4 +9.5bps at 95.29, U4 +12bps at 95.68, Z4 +12.5bps at 95.995, H5 +13.5bps at 96.235, M5 +14bps at 96.385, U5 +14bps at 96.45, U6 +15.5bps at 96.54, U7 +15.5bps at 96.475.


• SOFR flat at 5.3% as of Aug 3rd, volumes fall to USD 1.413tln from 1.416tln.


• NY Fed RRP op demand at USD 1.794tln (prev. 1.777tln) across 102 counterparties (prev. 105).


• EFFR flat at 5.33% as of Aug 3rd, volumes flat at USD 105bln.

NEXT WEEK (US items bolded):

• MON: Fed's Bostic, Bowman, Consumer Credit, BoJ Summary of Opinions, German Industrial Output (Jun), EZ Sentix Index (Aug).


• TUE: Fed's Harker, NFIB, International trade, IBD/TIPP index, 3yr auction, EIA STEO, Chinese Trade Balance (Jul), German Final CPI (Jul), Canadian Trade Balance (Jul).


• WED: 10yr auction, Chinese Inflation (Jul).


• THU: Fed's Bostic, CPI (Jul), Jobless Claims, US budget, 30yr auction, RBI Announcement, Banxico Announcement, OPEC MOMR.


• FRI: US PPI (Jul), US Uni of Michigan Prelim. Survey (Aug), IEA OMR, UK GDP (Jun), French/Spanish Final CPI (Jul).

REFUNDING: US to sell USD 42bln of 3yr notes (prev. 40bln) on Aug 8th, USD 38bln of 10yr notes (prev. 35bln) on Aug 9th, and USD 23bln of 30yr bonds (prev. 21bln) on Aug 10th; all to settle August 15th.

04 Aug 2023 - 20:30- Fixed IncomeData- Source: Newsquawk