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$25B Verizon Mega-Deal Outstrips 30Y Bond Auction

US TSYS SUMMARY
Tsys trade mixed after the bell, yield curves steeper (5s30s cracked 150.0) with the long end weaker all session.
  • Tsy futures traded lower post-wkly claims (712k vs. 725k est), had already trimmed knock-on gains tied to rally in EGBs post ECB annc: left rate, refi and marginal lending steady while Bunds surged on faster purchase pace of PEPP. Decent two-way in TYM after better buyers. Large 2s5s steepener Block: +12,619 TUM, 110-23.38, post-time offer at 0927:23ET vs. -10,275 FVM 124-00.25 through the 124-00.5 bid.
  • Sideways rate trade (as equities powered higher, ESH1 +45.0 late) as markets prepared to absorb $24B 30Y bond auction re-open. Massive $25B Verizon mega-deal: 9-tranche issue had many guessing after first caught wind of it late Wed. Size not know (rumored only) until after the bond auction that drew 2.295% high yield (1.933% last month) vs. 2.290% WI; w/ 2.28 bid/cover.
  • Huge $25B 9pt issue at the low end of the estimate, appears some prop/fast$ accounts had anticipated larger issuance and had sold along with hedges -- contributed to the bounce in Tsys after the 30Y Bond R/O auction tailed slightly.
  • Speaking of supply: US Treasury responding to the passage of the $1.9T Covid relief package by increasing next weeks 13W and 26W bill auctions by $3B each, the 42D CMB by $5B.
  • The 2-Yr yield is down 1.4bps at 0.1389%, 5-Yr is down 1.6bps at 0.773%, 10-Yr is up 0.7bps at 1.5248%, and 30-Yr is up 3.5bps at 2.273%.
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