Bond Traders Weekly Outlook: Two Year Note Underperforms After Stellar Treasury Auction Week

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    Early Bonds: U.S. Treasuries lower with shorter tenors expected to lead the early weakness after they were also at the forefront of Friday’s selling.

    The start of the new week is once again underscored by low volume, due to a bank holiday in the United Kingdom.

    Crude oil is building on its bounce from late last week while the U.S. Dollar Index is down 0.2% at 101.04.

    The Federal Reserve will release its latest Senior Loan Officer Opinion Survey this afternoon.

    2-yr: +5 bps to 3.96%
    3-yr: +4 bps to 3.69%
    5-yr: +4 bps to 3.46%
    10-yr: +3 bps to 3.48%
    30-yr: +4 bps to 3.80%


    Bond Wrap: U.S. Treasuries added to Friday sharp losses

    Corporate bond offerings, $5 bln by Apple $AAPL The longest chunk of the offering is expected to yield as much as 135 bps over Treasuries of same duration, according to Bloomberg.

    April Senior Loan Officer Opinion Survey

    Showed that standards for commercial & industrial loans to smaller and mid-sized firms tightened during the first quarter while demand slowed. Standards for all commercial real estate loans also tightened while demand fell. Survey respondents noted that tightening in standards was due to a more uncertain economic outlook, lower risk tolerance, and concerns about funding costs and liquidity positions.

    2yr +8 bps to 3.99%
    3yr +7 bps to 3.72%
    5yr +8 bps to 3.50%
    10yr +8 bps to 3.52%
    30yr +7 bps to 3.84%


    Early Bonds: U.S. Treasuries are on track for a mostly higher start after a couple days of losses.

    Overnight action saw a mostly lower showing from equities in Asia while European stocks are also on the defensive. China reported a larger than expected trade surplus for April, though imports decreased more than expected. Comments from some European Central Bank policymakers suggest that the tightening cycle could continue until September.

    Today’s economic data was limited to an early-morning release of the NFIB Small Business Optimism Index for April, which fell to 89.0 from 90.1 in March.
    The U.S. Treasury will kick off this week’s note and bond auction slate with a $40 bln 3-yr note sale.

    The U.S. Dollar Index is up 0.3% at 101.64.

    2-yr: UNCH at 3.99%
    3-yr: -2 bps to 3.70%
    5-yr: -3 bps to 3.47%
    10-yr: -3 bps to 3.49%
    30-yr: -4 bps to 3.80%


    US Treasury announced it has cut its bill sizes with the Debt Ceiling overhang:

    Cut size of 4-Week bill sale to $35b from $50b
    Cut size of 8-Week bill sale to $35b from $45b


    Treasury yields sharply lower in response to the CPI data.

    The 2-yr note yield, at 4.07% earlier, is down two basis points to 3.98%.
    The 10-yr note yield, at 3.51% earlier, is down four basis points to 3.47%.

    Key takeaway from the report as far as the market is concerned is that the moderation in inflation, coupled with the moderation in the shelter index, should at least spur the Fed to entertain keeping its policy rate on hold when it meets again in June.

    13:00 ET: $35 bln 10-yr Treasury note auction results

    2-yr: -3 bps to 3.97%
    3-yr: -9 bps to 3.63%
    5-yr: -8 bps to 3.42%
    10-yr: -5 bps to 3.47%
    30-yr: -4 bps to 3.81%


    U.S. Treasuries ended the week lower, giving back their gains from earlier in the week. Friday’s retreat left yields on 10s and 30s little changed for
    [See the full post at: Bond Traders Weekly Outlook: Two Year Note Underperforms After Stellar Treasury Auction Week]

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