It is Easter Monday, with most of the globe on holiday, making this a very quiet day. We aren’t even close to 100K TY futures traded, which lately is around the number we get to between Tokyo lunch and the European open. Oh well. As of 8 AM ET, Treasuries are either side of unchanged from the 3 PM marks on Friday, with curve gently flattening, while equity index futures are down roughly .5%, well off their worst levels of the evening.
In Asia, JGBs bull steepened small after the BOJ bought 1-10y sector of the JGB curve, with 2y notes closing 1.5 bps lower in yield, 5y sector .5 bps cheaper and rest of the curve basically flat, although 20y sector traded heavy into the early Japan close (3 PM Japanese time in observance of Easter). New Zealand and Australia were both shuttered for the holiday.
All of Europe was closed as well for the holiday. As for Treasuries, there was very light Japanese real money buying of US belly in cash 5s and TYM contracts. Long end underperformed, but more on apathy then flow. Cash Treasuries shut when Japan closed (2 AM ET) and did not reopen until 6 AM ET. Since the reopen, the long end has been slightly better bid, but flows remain unremarkable.
Oil is trading small to better after last minute intervention of President Trump to get a deal across the finish line that slashes oil production by 9.7MM barrels per day. End of the day, only oil producing company stocks are benefiting for now from the deal. Oil has had no real bounce yet, since its beat down late Thursday, while the few equity markets that were open in Japan and the US have thus far been rather non-plussed by the news. NIKKEI closed down 2.3% and US futures continue to struggle although off their worst levels.
Today’s calendar in the US is barren, with only $30BN in POMO at the usual times running from 9:50 AM ET until 12:20 PM ET, along with weekly 3m and 6m bill auctions.
Did notice over the weekend that commitment of traders report is starting to get a bit more interesting. On this side, we like to keep it simple and pay most attention to the very long end of the curve, since long end signals have always had the best correlation to reports such as Commitment of Traders and Stone McCarthy Money Manager Poll. For trade ending with period up until April 7th, US classic saw 16K increase in spec shorts and 4K increase in spec longs, leaving the net position at 117.5K short; that is the largest short in Classics since Fall of 2018. The ultra bond has less historical data to work off, but the net short there is currently 266K contracts. Both sectors have impressive commercial longs: 108K net long in classics, 226K net long in Ultra. The point is to be very careful if you are looking at a steepener here involving the long end. Duration is its own animal and positioning will always be the primary driver there. Just a warning.
Okay, as for today, let’s call the range in TYM at 138-14+ to 138-02+, after a range thus far of 138-11 to 138-00. Support below 138-02+ comes in at 138-00+, 137-28/27, 137-22, 137-16, 137-06+; resistance comes in at 138-12+, the aforementioned 138-14+, 138-19, 138-24+, 138-31/139-00, 139-09, 139-13+. Don’t have a great axe today, will spend most of my time fighting off a food hangover and trying to stay awake; markets will get more active tomorrow, or so we can hope.
Have a great Easter Monday,