Bond Traders Weekly Outlook: Bond Markets Moving with Chaotic Trepidation

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    Early Bonds: U.S. Treasuries mixed start with long bond relative weakness
    Many major markets are also closed for LaborDay.

    2-yr: UNCH at 4.06%
    3-yr: -1 bp to 3.77%
    5-yr: -1 bp to 3.53%
    10-yr: +1 bp to 3.46%
    30-yr: +2 bps to 3.70% Update


    Early Bonds: U.S. Treasuries mixed with longer tenors expected to show relative strength after lagging yesterday while the 2-yr note is set to begin just below its flat line after outperforming on Monday.

    The Reserve Bank of Australia unexpectedly raised its cash rate by 25 bps to 3.85% with Governor Lowe indicating that additional tightening may be required.

    In the U.S., Treasury Secretary Yellen said in a letter to Congress that the Treasury Department could exhaust its extraordinary measures by June 1 if there is no deal to extend or suspend the debt ceiling.

    2-yr: +1 bp to 4.13%
    3-yr: -1 bp to 3.83%
    5-yr: -3 bps to 3.60%
    10-yr: -4 bps to 3.53%
    30-yr: -4 bps to 3.78%


    Bonds Update: Up across most Treasury tenors,
    2-yr note yield down 16 basis points to 3.96%
    10-yr note yield is down 13 basis points to 3.43%.
    BUT 3-month T-bill yields up 13 basis points to 5.15% in direct response to Yellen’s debt ceiling warning. Update


    Early Bonds U.S. Treasuries trade on their highs after adding to their initial gains.

    Treasuries extended opening gains shortly after the start while recent action saw another push that pressured yields to fresh lows for the day. Issues in the belly of the curve outperformed in the early going, and they remain a bit ahead at this juncture.

    Economic data released this morning showed a much better than expected increase in the ADP Employment Change survey for April (actual 296,000; consensus 142,000) and an in-line uptick in the ISM Non-Manufacturing Index for April (actual 51.9%; consensus 51.9%; prior 51.2%).

    On a separate note, The U.S. Treasury announced that auction sizes will be maintained in Q2, but these auctions may become upsized as soon as August. The Treasury also announced that it will begin a buyback program in 2024, aiming to improve liquidity.

    Yield Check:
    2-yr: -2 bps to 3.95%
    3-yr: -4 bps to 3.65%
    5-yr: -6 bps to 3.41%
    10-yr: -5 bps to 3.39%
    30-yr: -5 bps to 3.69%


    US Treasury to sell $40B in 3 years, $35B in 10 years and $21B in 30 years next week

    To keep nominal coupon and floating rate new issue sizes
    Could modestly raise auction sizes later this year, possibly as soon as August
    Anticipates greater than normal variability in benchmark bill issuance and significant use of cash management bills until debt limit suspended or increased
    Failure to raise or suspend debt ceiling with all due haste is reckless and is already disrupting Treasury market functioning
    The Treasury Department said they plan to implement a program in early 2024, and the details of the buyback program will be finalized over the balance of 2023.


    Bond markets have moved with chaotic trepidation. The three-month/two-year Treasury yield spread inverted a further 25 bps this week to negative 132 b
    [See the full post at: Bond Traders Weekly Outlook: Bond Markets Moving with Chaotic Trepidation]

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