7yy ahead of supply; while we slept; EZ bonds grind cheaper (Omicron less threatening), watching GILTS
Jimmy Cayne of Bear completing the trifecta ... may he, Madden and Harry Reid all RIP
Good morning. Here is a chart I’ll be watching as the day proceeds as it represents to me the last liquidity event (auction) of the year and as such, may represent final moment where one who needs ‘size’ bids/offers can find it.
As the ink-blot test goes, I see (daily) momentum grinding into overSOLD territory but see very little that is compelling in as far as yields.
Typically, 7yy offer a better read of global DEMAND and with supply of USTs to come down in 2022 (in time for tapering and tightening?), it may be worth tuning in around 1pm to see who shows up TO the issuance party.
This mornings update is bit later than I’d normally be passing this along but then, if / when I were to tell you we didn’t miss much, well … I’d be WRONG today, at least as far as this one shop goes.
…Treasuries are modestly lower and the curve has steepened around a little-changed (after accounting for the 5y roll) belly of the curve. DXY is a hair higher (+0.07%) while front WTI futures are modestly lower (-0.5%). Asian stocks were mostly lower (NKY -0.56%, SHCOMP -0.91%), EU and UK share markets are mixed (FTSE 100 +1% while SX5E -0.3%) and ES futures are showing +0.1% here at 6:45am. We got no overnight flow color this morning but overnight US Treasury volume was ~115% of average with 7's (156%) seeing the highest relative average turnover this morning ahead of this afternoon's 7y auction. 2's saw some decent activity too (139%).
Wait, what? INCREASED VOLUME? I suppose, when you set the bar low enough it’s easy to impress. Same outfit goes on to offer a bit more word salad and visuals
…Well, 5 calendar days away and what was missed? A sharp 1bp sell-off in UST 5's it looks like. Moreover, it was as hard as ever to source interesting, rates-related news links this morning. It's like today's prices, and those left behind on the desks to tend to them, are merely placeholders for the launch into 2022 … After being away, we review the price charts for a sense of what happened while out and to take the temp on trends in US rates benchmarks. This morning's scan of the US rates benchmark charts revealed little that we didn't already know or assume, sadly.
UST 2yrs, monthly: This bigger-picture look at 2's and its associated monthly momentum (lower panel) shows 2's remaining in a sustainable-looking bear phase. As mentioned before, we see little in the way of longer-term support for 2's until 1.31%- the bottom of their pre-pandemic rate range.
UST 5yrs, weekly: 5's have so far respected their support derived from their pre-pandemic rate range low at ~1.31% too...
UST 2s5s10s 'fly, daily: This 'fly probed support (drawn in) near 24bp this morning- the lowest level seen since mid-October. This 'fly is beginning to edge into 'oversold' territory and that leads the observer to a sense that the 24bp support level should hold up over the near-term?
Putting this one particular commentary aside and moving on to a couple other emails in the inbox, as to what happened overnight, this from MNI just after 5a
MNI US Open: European FI Heads Lower
EXECUTIVE SUMMARY:
Following a firm start, European government bonds have traded weaker through the morning
The dollar has held firm against DM FX, while equity performance has been mixed.
…FIXED INCOME: FI Markets Potentially Reflecting Less Malign Omicron Scenario
Having initially firmed around the open, EGBs soon sold off alongside a sharp move lower in gilts.
Catalysts for price action are thin on the ground given the lack of tier one economic data, European supply and an absence of central bank speakers.
Covid headlines remain a key driver for markets. While the US and some European countries have recorded record high daily cases, the scientific consensus seems to be converging on the prospect of the Omicron variant being less deadly than initially feared. Fixed income markets are arguably reflecting an improvement in risk sentiment at the margin.
Gilts are underperforming EGBs with cash yields 4-5bp higher on the day.
The bund curve has bear steepened with the 2s30s spread widening 3bp.
The OAT curve has steepened more sharply on the back of the very short-end trading bid and longer-end yields pushing higher. The 2s30s spread has traded up 6bp.
BTP yields are almost uniformly 3bp higher across the curve.
And finally, a LINK TO SOME PRESS PICKS from IGM for your dining and dancing pleasure. You’ll note news/links to stories you’ll be hearing/talking about throughout the day and can always say you saw ‘em from IGM first.
Of ALL the stories which I found informative, the news overnight that Madden has passed followed by Harry Reid then a short while later, left many wondering who’s next to complete the trifecta.
Page 2 of 3 on PRESS PICKS from IGM you’ll find link to THIS STORY,
More (or less) later, as necessary…