Markets are starting a busy two-week period quietly, with volume and activity tame thus far today. Not a lot to write about on this dreary March Monday, with Treasury volume below average (only 250K TYM trade as of 7:15 AM ET). As of 8 AM ET, Treasuries are 1-2.2 bps higher in yield while US equity futures are mixed: DJ futures down .5% as Boeing weighs, rest of US indices marginally higher.
There are a few things worth noting though that may impact this week:
*This has gotten little play in the US, but very long end of EUR curve saw very good demand in swap space last week, especially on Friday, with swap spreads there tightening 4 bps on Friday alone, and 5 bps against the 5y sector of the curve. Specifically, the flows were real money and RV accounts anticipating ALM receiving this upcoming week after ECB’s return to TLTRO facility. Watch the US 30y early this week to see if the flows and sentiment makes its way across the pond.
*US monthly long-end supply kicks off with today’s issuance of $38BN 3y notes, before tomorrow’s 10y reopening ($24 BN) and Wednesday’s 30y reopening ($16BN). Highlight the fact that we have the 30y reopening when there is potential for another run on long end paper if the speculation is right in European rates.
*The next big Brexit vote is the MV2 vote in Parliament, currently scheduled for approximately 3 PM ET tomorrow. As one would expect, gilts trade very quietly given the event risk tomorrow.
*Flows overnight have seen some decent receiving in long end of bund curve, outright and against 10y sector today. There have been several cleared invoice trades in that space going the same way as well. Treasuries have spent the night trading quietly: early bid in Asia saw better RV selling on the European open, both outright and against bunds in the 10y sector. After US 5y sector led the initial back up, 30y is now the dog for the moment, given macro selling of 30s outright and against buxl. Very small interest out of Asia to buy spread product overnight, and have yet to hear any interest from central banks either. Decent put buying in RX space and TY space shortly after the European open weighed on those sectors, but hedge fund buying of 4500 USM 153 calls for 9/64 just before NY walked in seemed to put a floor under Treasuries. Impending 3y supply in BTPs has pushed Italy wider against core and rest of peripherals, so that may bear watching down the road.
Aside from the US 3y supply today, we also get January Retail sales (still catching up from the shutdown) at 8:30 AM ET. Powell speaks (AGAIN!) on video tape at 7 PM ET tonight, delivering welcoming remarks before the National Community Reinvestment Conference in Washington; don’t expect anything ahead of next week’s FOMC.
Okay, for choice today, let’s call the range in TYM at 122-25+ to 122-12, yeah don’t have a lot of hope for today!
Be well,
mjc