US TSYS/RESEARCH: RBC analysts expected "higher" US rates as "the unwind from a harsh winter is becoming more evident in the data and continued sings of a rebound should lead rates higher." They also expected a "steeper" curve and expect that the "curve/level of rates correlation to remain fairly low, but look for recent steepening to continue as investors are attracted by the carry and roll." They projected that swap spreads would see a "partial reverse in long-end spreads" and added that long-end spreads "will retrace about 10 bps of the recent tightening."
US TSYS: CRT analysts David Ader and Ian Lyngen said that next week's Treasury auctions all came in "sized as expected" with $26 bn 2s, $35 bn 5s, and $29 bn 7s. "This $90 bn of gross issuance is made less daunting by the $77.9 bn of offsetting maturities, which leaves just $12.1 bn in net new issuance needed to takedown supply," they said. "That is not a record low in cash needs, but surely a factor as we look to take down this trio. Recall the elevated issuance has been a bigger factor supporting 2s and 3s than longer-dated issues."
ITALY: Fitch Ratings affirmed Italy's Long-term foreign and local currency Issuer Default Ratings at 'BBB+', Stable Outlooks, and BBB+ issue ratings on Italy's sr unsecured foreign and local currency bonds', affirmed AA Country Ceiling, F2 S/T FX IDR. It said "Italy's economic growth performance is weak" but recent data underpins its "unchanged forecast since the last rating review in October 2014 that Italy will finally exit its deep and protracted recession in 2015. The recovery is supported by the combination of the ECB's monetary easing, the weaker euro, strengthening confidence and lower oil prices." But "GDP growth forecast of 0.6% in 2015 and 1% in 2016 is weak compared with other eurozone members and GDP is currently close to its 2000 value, 9% below its 2008 peak," it said. "Nominal GDP growth will strengthen only gradually after being flat between 2010 and 2014." It said Italy's "genrl govt gross debt is exceptionally high at 132% of GDP in 2014" vs. 40% BBB median. Fitch forecasts it will peak at 133% of GDP this year and remain above 120% until 2020, leaving Italy highly exposed to potential adverse shocks. Reducing the debt ratio will require a continued recovery and maintaining large primary budget surpluses."
SPAIN: Fitch affirmed affirmed Spain's Long-term foreign and local currency IDRs at 'BBB+', with "stable" outlooks; it affirmed issue ratings on Spain's senior unsecured foreign and local currency bonds at 'BBB+'. Country Ceiling affirmed at 'AA+' and Short-term foreign currency IDR at 'F2'. Fitch said the "Spanish economy is recovering strongly, enhancing confidence in its successful adjustment within the eurozone. Growth accelerated further since the last rating review in October 2014 and reached 2% in 4Q14, over-performing not only the eurozone, but also Germany. Fitch forecasts GDP growth, driven predominantly by domestic demand, to reach 2.5% this year and 2.3% in 2016, an upward revision of 0.8pp and 0.4pp, respectively." It said "both external and domestic factors support the recovery" with "positive feedback loop has evolved between improving confidence, fuelled by easing financial conditions, higher employment, benefiting from earlier labor market reforms, and growing household consumption."
US TSYS: Commodity Futures Trading Commission/Commitment of Traders data for the period ending April 21 has been released. Except for 2- and 5-year notes, the latest report showed large speculative accounts sold across the curve (paring longs or adding to existing shorts). In the short end, large speculative accounts added to net shorts in Fed fund futures by -10,630 to finish -127,751, and pared net longs in Eurodollar futures by -27,552 to finish +481,133. In notes, the group added net longs in the 2-year by +20,685 to finish +178,831, and pared net shorts in the 5-year note by +47,153 to finish -21,494. The group added net shorts in the 10-year note by -41,463 to finish -153,366. In the long end, the group pared net longs in the 30-year Bond by -21,675 to +4,774, and added to a net short in the Ultra-bond by -1,295 to finish -36,647.
US TSYS SUMMARY: Pt II: 1) Tsys afternoon saw mild safe-haven bid on Greek worries, evacuation of Statue of Liberty & Liberty Island on suspicious package probe;later declared no threat 2)Bloomberg says Austrian bank Oesterreichische Volksbanken AG will spin off E7.1B (US$7.7B) in assets into "bad bank" 3) Tsy sells $26B 2Y Mon, $35B 5Y Tue, $15B 2Y FRN & $29B 7Y Wed;settle Thu (4/30); - Treasuries ended Fri 3:00 p.m. ET from Thursday 3:00 p.m. ET: - The 2-year note ended at 0.512% (99-312) from 0.532% (99-30) - The 3-year note ended at 0.838% (99-236) from 0.870% (99-206) - The 5-year note ended at 1.322% (100-08) from 1.359% (100-02+) - The 7-year note ended at 1.671% (100-16+) from 1.702% (100-10) - The 10-year note ended at 1.916% (100-24) from 1.947% (100-15) - The 30-year bond ended at 2.617% (97-19) from 2.636% (97-06+) - The 2/5-year curve flattened to 81 bps from +82.7 bps - The 2/10-year curve flattened to +140.4 bps from +141.5 bps - The 2/30-year curve steepened a bit to +210.5 bps from +210.4 bps - The 5/30-year curve steepened to +129.5 bps from +127.7 bps
US TSYS SUMMARY: Treasuries gained Fri after 1) Morning short-covering rally on weaker-than-expected 4% US March durable goods, -0.2% ex-transport 2) That surprised dealers who set shorts into next week's 2/5/7Y auctions so they rushed to cover 3) Tsys saw mild morning, afternoon safe-haven buying on weekend Greek event risk 4) Sellers dried up 5) 2Y notes, Eurodollar futures saw buying as some delayed dates for first US rate hikes; 6) Hedge fund buying in June 5Y Tsy futures; 7) Other bullish factors: expected month-end buying, wknd risk, Greece, some flatteners pre-supply; 8) Tsys began firm then early pre-durables shorts or sales 9) US interest rate swaps saw relief as long end stopped its collapse, with some 8Y, 10Y Receivers and milder receivers in front end; spread widening on absence of large receiving; 10) Some sold UK Gilts to buy German Bunds; 11) June 10Y Bund futures gained into European close for weekend on mild FTQ buying as Greek 10Y spread vs. German debt widened by 33.5 bps to +1332 bps (More)
US TSY FUTURES CLOSE: Tsys end higher/flatter after a midday risk-off induced pop. Jun Ultra bonds close up 17/32 at 168-06 with 55K traded Jun 30Y bonds were up 17/32 at 162-18 with 180K traded Jun 10Y notes were up 8/32 at 129-12.5 with 959K traded Jun 5Y note were up 6.25/32 at 120-20.5 with 461K traded Jun 2Y note were up 2/32 at 109-23.25 with 171K changing hands.
US OUTLOOK/OPINION: TD says market has much data to digest next wk along with outcome of April FOMC and these will give "some much needed direction to investors." Q1 GDP of particular interest and TD calls for +0.8%. Fed has ruled out hike in Apr, and focus should be "less on what the Fed does (since no action is expected) and more about what they imply about the outlook for the conduct of monetary policy by its economic assessment." Look for any shifts in the bias for a June liftoff.
US TSYS/RESEARCH: TD analysts said on Treasury Curves that the "belly of the curve has closely tracked the economic data performance over the past year, and while investors are likely to continue buying 5s on the 2s/5s/10s fly, we believe this trade may be susceptible to a reversal if data momentum starts to improve."
US TSY FLOWS: Look to go out firm amid a light volume day with a focus on weak durables leading to slightly lowered expectations for US Q1 GDP. Move not dramatic and neither were flows to support the price action but it does bring into mind that the Fed could be more dovish on Wed. Tsy still within a range. Stocks better with utilities up withj Tsys. Perhaps the most interesting commentary was on the body language of the Finance Ministers leaving the meeting today, all glad handing each other but ignoring the Greek team like the plague. Some players said the body language was scary.....
US TSYS: Traders heave a sigh of relief as WSJ cited authorities saying that there now was no threat at Statue of Liberty/Liberty Island; they said too that the locker that was believed to have the suspicious package was empty at the Statue of Liberty.
US TSYS: Treasuries see a bit more late short-covering amid safe-haven bid amid NY's Statue of Liberty/Liberty State Park evacuation for suspicious package, and FTQ bid in case of weekend Greek events. Cash 10-year note is at 1.924%.
US TSYS: Tsys see a mild late bid. Traders are eyeing the Statue of Liberty; latest development is that the Wall St. Journal said the evacuation of Statue of Liberty and Liberty Island was done after "a bomb threat was called in, and a canine patrol picked up the scent of a suspicious package."
US TSYS: Traders eyed news as CNN (TWX) said the NY Police Dept. bomb squad is on the scene at the Statue of Liberty on Liberty Island, which is confirmed by an NYPD tweet. CBS2 cited police saying that there is no indication this packge is an explosive device, but they will X-ray the package as a precaution.
US TSYS: Traders still awaiting further word on the Statue of Liberty/Liberty Island evacuation amid suspicious package. NYC police officials confirm to MNI that they are aiding the National Parks Service in the investigation. "The Parks police are handling this, we are assisting them," said one NYC police official. US TSYS: Traders still awaiting further word on the Statue of Liberty/Liberty Island evacuation amid suspicious package. NYC police officials confirm to MNI that they are aiding the National Parks Service in the investigation. "The Parks police are handling this, we are assisting them," said one NYC police official. A NPS spokeswoman told MNI, "The (Liberty) Island was evacuated as a precautionary measure, with a report of a suspicious package. That is all we can provide at this time."
US OUTLOOK/OPINION: DB says "the most important releases are Q1 GDP on Wednesday, Q1 ECI on Thursday and the April manufacturing ISM on Friday. GDP will be dismal, the ECI should show a modest firming, and the ISM will likely remain near the bottom end of its recent range."
US TSYS: Treasuries traders watching the situation in New York, as CBS NY reports that the Statue of Liberty and Liberty Island have been evacuated due to a "suspicious package." The TV station cited officials saying such package was found at the Liberty Island shoreline around 12:33pm ET today, while officials are "evaluating" the package (which has been "left unattended"). (link: http://newyork.cbslocal.com/2015/04/24/statue-of-liberty-evacuated/) MNI has calls in to National Park Service public relations officials to find out more information about the situation.
US TSYS/RESEARCH: Tsys hold a tight higher range after morning short-covering rally, afternoon mild profit-taking. CRT's Ader and Lyngen also said on the US front, the Tsys market faces the $26B 2Y Auction Mon, then $35B 5Y Auction Tuesday, then the Wed $15B 2Y FRN and $29B 7Y auction Wed. "We get 2s, 5s and 7s" auctions, "which are generally sectors of the curve which are outperforming, and so that alone warrants a degree of sponsorship," said the CRT analysts. "Further, supply events in these sectors (really 2s and 5s) have attracted overseas demand and given, for instance, the recent (buying inclination) behavior of Japan, we'd say more of the same." They projected the 2-year note auction "comes through" while 5Y auction will get done "on the screws but with a bias for a bid through," while 7-year note auction could be "mixed to a small tail."
US TSYS/RESEARCH: CRT's David Ader and Ian Lyngen said next week is "rather a big week" in "data and news and auctions" but they don't "really anticipate a lot of movement based on these events." They add that "just ahead we have ISM" on Friday May 1st, April NFP on May 8th, and UK elections and the May Refunding announcement in early May, "which we suspect will keep most people's hands" tied. "So to the specifics of this (next) week there is, of course, the likelihood of more Greek headlines, and here we'll suggest no resolution, but rather more talks and stress. On the margin, that is going to be supportive for rates and, given the mood of the headlines last week, we'll be more supportive for front-end flight to quality."
US TSY OPTIONS: Hearing latest flow includes -- +7,500 TYM 133 calls at 2/64 (screen volume in 130 call/sales tops out at 30k, while TYM 131 calls trade 13k and 11.8k TYM 132 calls) -- -1,700 FVK 120.5 straddles at 7/64 -- +3,000 TYN 125/133 call over risk reversals at 1/64 -- Update, total +8,000 TYM 127.5/131.5 strangles at 14/64
US TSYS SUMMARY: Treasuries gained Friday morning after 1) Short- covering rally spurred by weaker-than-expected 4% US March durable goods and -0.2% ex-transport; 2) That caught dealers by surprise, as they had set shorts in front of next week's 2/5/7Y auctions, so they had to cover; 3) Tsys also saw mild safe-haven buying into the market given ongoing Greek event risk; 4) Sellers dried up too; 5) 2Y notes and Eurodollar futures saw buying as some extended out their dates for the first US rate hikes; 6) Hedge fund buying occurred in June 5Y Tsy futures; 7) Other bullish factors: expected month-end buying, weekend risk, Greece, some flatteners pre-supply; 8) Tsys began firmer, then saw early pre-durables shorts or sales 9) US interest rate swaps saw relief as the long end stopped its collapse, with some 8Y, 10Y Receivers and milder receivers in front end; but spread widening occurred amid absence of large receiving; 10) Some sold UK Gilts to buy German Bunds; 11) June 10Y Bund futures gained into European close for weekend on mild FTQ buying as Greek 10Y spread vs. German debt widened by 33.5 bps to +1332 bps
US: Atl Fed's GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.1 percent on April 24, unchanged from April 16. The real GDP growth nowcast ticked up to 0.2 percent on April 22 when that morning's existing home sales release was out, now is lowered on durables.
FED: Fed Policymakers Watching To See If First Quarter Weakness Transitory Or More Permanent; Weak First Quarter Lessened June Lift-off Odds, But Strong Second Quarter Data Could Change Fed Thinking. See MNI Main wire story.
US TSYS: Treasuries saw mild profit-taking at the day's highs and now see muted two-way flows. With Europe having gone home for the day, the market cannot really react to European news, thus traders will be fairly cautious until they get through the weekend without any Greek problems, they said. Cash 10-year note is at 1.916%, now, after it reached a session low yield of 1.907% around 11:20am ET; the 100-day moving average is at 1.900% so that will be watched to see if the 10-year will be around there, at the close, said traders. Meanwhile traders eyed the 2/5/7Y auction supply next week, which starts up quickly with the Mon $26B 2Y auction, then Tuesday $35B 5Y auction, then Wed $15B 2Y FRN and $29B note auctions.
US TSYS/TIPS: TD's Gennadiy Goldberg eyed Thursday's fairly solid $18B 5Y TIPS auction (which trades today at a profit by the way) and cited the 61.5% indirects at a "very strong 91% hit ratio, their highest since April 2013" while directs had a "decent" 6.3% take. "We will await allotment data for confirmation, but we suspect that investment funds may have been behind the stronger bid to TIPS at the auction, with recent spikes in TIPS ETF volumes likely aiding demand," he said.
US TSY OPTIONS: Hearing latest flow includes -- Screen update, -30,000 TYM 130 calls at 28- down to 27/64. Opinions vary, most see sales as closer with the 130 calls holding largest open interest in June calls coming into the session (106,725 final CME run for Thu); position build for large East coast $ manager since start of the year. Others point to West coast $ manager back to legging strangles for favorite yield enhancement strategy.
US TSYS/RESEARCH: TD analysts said "next week's set of economic data should go a longer way in providing direction" to the Tsys market and "we will look to March personal consumption and spending, pending home sales, April Chicago PMI, and Q1 ECI data to suggest further improvement in economic momentum following the early-year slowdown." But they "nevertheless caution that the pace of improvement could remain somewhat slower" than the Tsys "market had recently expected, potentially keeping Treasuries pinned in their recent range trade. Wednesday's FOMC meeting could also complicate the market's perception of economic progress, with an acknowledgement of the slower than expected rebound likely keeping investors cautious about rate hikes later in the year." They add that "the coming week's 2s/5s/7s supply and month-end extensions could further complicate near-term market momentum."
US OUTLOOK/OPINION: Summary of FOMC opinion pre-Apr 29 policy statement- CS- modestly dovish statement as domestic data generally disappointed & must acknowledge this soft patch. May downplay slowdown as temporary, so market conviction in a rate hike later this year may get a boost. Goldman- officials reinforcing risk of later liftoff, specifically highlighting weaker data. April to remain similar to prior statement. UBS- FOMC at a standstill, "held in place by softer growth figures," likely to be little change in statement. RBC- "broad strokes of the economic assessment will not materially worsen." Might mark-to-market on the jobs front." Street should focus on whether there's forward guidance for June--not seen as likely though. BAML- should note the disappointing recent data, which should sharply reduce odds of June liftoff. However, will not explicitly rule out June. BNP- few changes, "with the Fed biding time until stronger data confirm that the economy's Q1 weakness was indeed transient."
US OUTLOOK/OPINION: JPM "are lowering projection for Q2 real annualized GDP growth from 3.0% to 2.5%. We believe the fundamental story of an improvement in Q2 remains intact, as weather and other temporary factors fade, but the vigor of that bounce looks somewhat muted." Still calling for Sept Fed liftoff.
US OUTLOOK/OPINION: BNP says next wk's FOMC statement "is likely to contain few changes, with the Fed biding its time until stronger data confirm that the economy's Q1 weakness was, indeed, transient."
US OUTLOOK/OPINION: BAML says "The April FOMC statement should note the disappointing recent data, which should sharply reduce the odds of June liftoff. However, we do not expect the statement to explicitly rule out a June hike. The FOMC wants to retain policy flexibility. If market participants are looking for a clear sign that the Fed will not hike in June, they are likely to be disappointed."
US TSYS: Traders said the market shows technical strength and they await more confirmation of that. Should the Classic Long Bond futures "close above 162-24/32 resistance, that would say that the Wednesday technical breakdown had been reversed," said one trader. Other cash market issues are looking stronger too. "The news is that market is recovering from the big break lower on Wednesday," said one trader. Traders also look to see if the cash 10-year note will close below the 100-day average of 1.90% yield, which would put the issue back in a more bullish mode; it is now at 1.916%, so not too far.
US TSYS: Treasuries take another run at the session highs, with more short-covering going on in cash Tsys and 10Y futures; cash 10-year note now at 1.919%. "There are no sellers, the durables were weak," said one trader. Meanwhile US stocks indexes are narrowly mixed, with DJIA off 0.03% while S&P 500 and Nasdaq up fractionally.
US OUTLOOK/OPINION: CS "expect the FOMC to produce a modestly dovish policy statement next week as domestic data generally have disappointed since its last meeting. Given the committee's explicitly data-dependent stance, we expect Fed officials to acknowledge this soft patch in economic activity. However, to the extent they downplay some of the Q1 slowdown as temporary, market conviction in a rate hike later this year may get a boost."
US OUTLOOK/OPINION: MS cut estimate for Q1 equipment investment to 3.2% from 4.7%. "With severe weakness in oil and gas drilling likely to leave structures investment substantially negative, we now see overall business investment falling 0.5% instead of rising 0.2%. Overall durable goods inventories rose a lower than expected 0.1%, and we now see inventories adding 0.4pp to Q1 GDP instead of 0.6pp." Q1 GDP is running +0.6%, and investment looks weak into Q2.
US TSYS: Treasuries waffle around at session price highs; 10-year note is at 1.924%. It seems the Tsys market is awaiting the European close to see what European accounts do as they head out the door for the weekend. Without a Greek situation solution seeming imminent, it seems the EGBS and Tsys could see something of a mild pre-weekend bid for safe-haven reasons, said traders. "The Greek story is always in the back of everyone's mind," said one trader.
US TSYS/OVERNIGHT REPO: The overnight repo market saw the 2-year and 5-year Treasury notes remain still tight at negative rates heading into next week's 2-year and 5-year note auctions. Traders have set pre-auction shorts into the month-end auctions, thus there is demand for those issues in repo, said observers. In other action, the 3-month bill calmed down from its previously tight status as the week's bill auctions settled, bringing in new supply. (More)
US OUTLOOK/OPINION: BAML says "While GDP has tended to be weak in the first quarter in recent years, the statistical evidence of a seasonal bias is weak. By contrast, there is more convincing evidence that core inflation is higher at the start of the year and lower at the end. We would not be surprised if core inflation inched up in the next few months only to weaken as the Fed approaches the exit."
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