risk on start to last week of April, but participation is awful again…(Monday)

We start this edition “groundhog April” right back on the hamster wheel: light volumes, limited participation and for now a small risk on trade in the market. Talk of more countries opening economies sooner, maybe even an earlier easing in New York state, all combining to support risk this last week of April. Heavy US supply this week, and FOMC meeting/press conference on Weds will be the highlights of this week. As of 8:15 AM ET, Treasuries are .5 to 2.5 bps higher in yield in a flattener for now, while US equity index futures are trading roughly 1% better, but off best levels of the night, ahead of the cash open.

Treasuries again staggered through a listless night, better to offered on largely one-way flows. Volume in TY futures was 170K for the night at 7 AM ET; that is pretty darned pathetic for a non-holiday session. The only buying in Treasuries overnight came from Asian central banks (of course) between Tokyo lunch and mid-morning in Europe as that community bought US 7s and 10s, of course lifting some mortgages along with the Treasuries. The rest of the world was better to sell, with Japanese asset managers dumping 2s and 3s, while Japanese lifers paid in USD 30y after Tokyo lunch. Asian bank sold 5s and 10s during the Asian session, paid in USD 5y swaps during the European session. Asian real money was a better opportunistic seller throughout the later European morning in 10s and TYM futures. European macro account sold TY futures against RX mid-morning in London, while RV account sold 5s outright and against 10s on the curve.

The Asian session was quiet, with focus on BoJ meeting announcement. As expected, BoJ announced unlimited buying of JGBs along with rates “remain(ing) at present levels”, specifically saying lower rates are still on the table; Kuroda expressed disappointment with Japanese growth and observed that any price momentum from the end of last year has been lost. Don’t make too much of the “unlimited” JGB buying, as BoJ has not taken full allotment of purchases in awhile, so expanding those amounts is more for show than anything else right now. JGBs ended the session 1 bp lower on the comfort of BoJ having no interest to move rates anytime soon, while Aussie 10s were 3 bps higher in yield on concession-building ahead of 10y auction tonight. Asian stocks were uniformly higher after Friday’s US performance and the general risk sentiment overnight, with NIKKEI up 2.7% to lead the pack, with rest of bourses up between .5% and 2.1%.

As expected, Moody’s did not lower Italian rating on Friday, helping the risk on sentiment further at the start of European trading. Italy opened 12 bps tighter to bunds, gave back a little and sits at roughly 9 tighter now. Greek bonds are 7 tighter, with Spain 4 tighter and Portugal 3 tighter. There was decent money manager buying of GGBs both outright and against bunds shortly after the European open which left core under pressure early. However, the dovish Kuroda press conference and some retracement of early equity gains helped core fixed income find footing in Europe, and supported Treasuries. As for gilts, announcement that Boris Johnson will lay out plans early this week to reopen the UK gradually helped bid risk, while supply (GBP 9.2BN in 4s, 10s, 30s and inflation-linked 8s) weighs on the market. There has been some selling of UK 10s and 30s by Asian real money account, as UK month end contracts .10 years versus extensions of .19 in bunds and .14 in Treasuries. There was small macro selling of 5y gilts to buy bobls shortly before US arrived as well. European equities are up 1.5% (FTSE) to 2.5% (DAX), most European bourses up 2% area.

Today in the US will be second tier data, with Revisions to the Retail Trade number at 10 AM ET and Dallas Fed Manufacturing number at 10:30. Way more important will be Treasury’s issuance of $42BN in new 2y at 11:30 AM ET followed by $43BN in new 5y notes at 1 PM ET; Treasury will also issue 6m bills at 11:30 and 3m bills at 1 PM. Something for everyone as they say! But don’t forget: Fed will buy $10BN in securities today in two operations, $5BN less per day than last week; today they will purchase 7-20y paper at 10:30 AM ET and 1-7.5 year TIPs at 11:20 AM ET.

And that brings us to trading today, as if maybe anyone will decide to trade. We have been in a moribund range for over a week now; no wonder gamma gets whacked every day. The bad news, it doesn’t look like this has a chance of changing before Weds at the earliest, and that’s me being REALLY optimistic. For choice today in TYM, call the range at 139-00 to 138-22+ for the rest of this session, after an overnight range of 139-01+ to 138-24. Support comes in at the 138-22+ level, 138-15+, 138-11+/12+ (gift to buy if we got there today), 138-02, 137-28; resistance comes in at 139-00, 139-04+, 139-12 (buy a break), 139-16+, 139-19, 139-27.

Have a good Monday,