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US TSYS
With 5-Year outperformance noted on the curve we point to several supportive factors:
- the previously covered Manheim used vehicle auction price move
- FOMC-dated OIS being biased a touch lower on the day
- the early London block buyer in FV futures (DV01 equivalent of ~$527K)
- sell-side recommendations issued late on Friday, namely Morgan Stanley recommending a long 5-Year outright position at 4.36% (with a plethora of reasons covering anything from positioning, to impending event risk and pension fund demand for duration) and J.P.Morgan recommending a 66%/33% weighted 3s/5s/10s belly-richening butterfly.
- There has been some block counter flow to the previously outlined block buy in FV futures (via FV/TY flatteners & an outright FV sale, albeit in smaller DV01 terms), but 5s have still richened by a little over 5bp on the 2-/5-/10-Year fly (pulling back from last week’s multi-month cheaps), with ~8bp of richening seen in outright terms, as the factors outlined above dominate.
Fig. 1: U.S. 2-/5-/10-Year Tsy Butterfly
source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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