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$40B 3Y Note Sale Tail, $37B Corporate Debt Issuance Weighed on Tsys


Another whip-saw session for US FI markets, weaker/near late session lows after extending gains immediately after Fed Chair Powell, Economic Club of Washington interview. No react to Trade Balance (-$67.4B vs -$68.5B est) or Redbook Feb store sales (+4.3%).

  • Initial risk-on reaction to Powell saying disinflationary process has begun but it's very early. Risk-on short lived as Powell reiterated the process is likely to take quite a bit of time. Then comes the labor market report for January, it's certainly stronger than anyone expected. But I would say it shows you why this will be a process that takes a significant period of time.
  • Treasury futures scaling back (Chair Powell-tied) support after $40B 3Y note auction (91282CGL9) tailed 4.3bp: 4.073% high yield vs. 4.035% WI; 2.33x bid-to-cover vs. 2.84x last month.
  • Tsys pressed on incoming corporate bond issuance, $11B Intel 7pt jumbo, foreign banks and sovereign wealth fund multi-tranche issuance totaled over $37B Tues, spurring early rate lock selling across the curve.
  • Cross asset: US$/Yen sold off earlier, Gold bounces while Crude has been marching higher last couple hours (WTI +3.20 at 77.31).

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