Quite bluntly, there is NOTHING to talk about this morning that has changed or crystallized since Friday. With Japan out for Mariner Day and everyone else taking it easy so far today, volumes are anemic to say the least (TY 110K contracts traded as of 7:30 AM ET, about the volume you would usually match just after Europe opens); cash volumes are also below 50% of average. Markets ignored slightly better Chinese GDP and retail sales for June. As of 8 AM ET, Treasuries are .75 to 1 bps higher in yield, while US equity futures are clinging to minor positives ahead of the cash open.
The only USD flows overnight, all in small sizes, were Asian real money sellers of TY contracts later in the Asian session and then Asian credit desks selling US 5s and 10s once cash opened in Europe. Treasuries have largely followed Bunds lower, as the latter deal with upcoming 2y supply along with growing slate of issuance by peripherals during the week. Bunds saw deal-related selling mid-morning in Europe, with bobls also being sold ahead of peripheral issuance this week.
Brexit (pressures on May, more specifically), Italian planning (okay, oxymoron), and the Putin/Trump summit are the headlines today, with US retail sales also being watched. Market will look for some financial issuance, expecting Citi, Wells, JP (already reported), with BoA (earlier today), GS (tomorrow) and MS (Weds) to take turns issuing this week after earnings.
Today’s calendar includes retail sales for June and Empire Manufacturing for July, all at 8:30 AM ET, followed by business inventories at 10 AM. Unfortunately that is all the calendar holds for today, ahead of IP/CU and Powell tomorrow morning.
Friday was about covering risk ahead of the weekend, which turned out to be a peaceful and restful two days, so the initial thrust today when we legitimately resumed trading this morning in Europe was risk on. Volatility continues to languish, curves continue to flatten, markets look for next impetus/direction. Let’s see if we get some cheapening (or I should say “even more”) into next week and it might be time to get conditional longs in place for the beginning of August. We’ll see. For choice today in TYU, call the range at 120-14+ to 120-06. The theoretical high Friday was at 120-12, and we got out a 120-12+, so look for a little more probing of the upside. Get through 120-14+/15+ and it’s hello 120-22, 120-26+, 121-02. If we get enough rate locking to push us through 120-06, then watch 120-02+, 119-29, 119-24+, 119-22+, 119-19.
Have a great start to your week….
mjc