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Early Flattening Holds

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A Touch Cheaper To Start The Week

US TSYS

TYZ2 nudges lower at the re-open, last -0-03 at 112-17, well within Friday’s range.

  • The curve twist flattened on Friday, with cash Tsys running 8bp cheaper to 3bp richer, pivoting around 7s, with all of the major benchmarks finishing comfortably off session cheaps. The 5-/30-Year yield spread hit another cycle low, while the 2-/10-Year spread moved back towards its own cycle extremes.
  • A surge higher in Gilt yields (tied to the UK “mini” budget) was responsible for early pressure. Tighter swap spreads in the long end likely aided the twist flattening momentum, with both fast and real money accounts said to be active in deploying cash from 7s to further out the curve.
  • Block buys in FV & UXY futures helped the space to pare losses.
  • Weekend comments from Atlanta Fed President Bostic (’24 voter) shouldn’t move the needle as has pointed to a continued need to ward off inflation, while suggesting that the strength of the U.S. economy/labour market presents the opportunity to allow an “orderly slowdown.”
  • Dallas & Chicago Fed activity data, 2-Year Tsy supply and Fedspeak from Mester, Bostic, Collins & Logan headline domestic matters on Monday. Second-round Gilt reaction to Friday’s fiscal announcements and any fallout from BTPs surrounding the Italian election will be eyed in pre-NY dealing.
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TYZ2 nudges lower at the re-open, last -0-03 at 112-17, well within Friday’s range.

  • The curve twist flattened on Friday, with cash Tsys running 8bp cheaper to 3bp richer, pivoting around 7s, with all of the major benchmarks finishing comfortably off session cheaps. The 5-/30-Year yield spread hit another cycle low, while the 2-/10-Year spread moved back towards its own cycle extremes.
  • A surge higher in Gilt yields (tied to the UK “mini” budget) was responsible for early pressure. Tighter swap spreads in the long end likely aided the twist flattening momentum, with both fast and real money accounts said to be active in deploying cash from 7s to further out the curve.
  • Block buys in FV & UXY futures helped the space to pare losses.
  • Weekend comments from Atlanta Fed President Bostic (’24 voter) shouldn’t move the needle as has pointed to a continued need to ward off inflation, while suggesting that the strength of the U.S. economy/labour market presents the opportunity to allow an “orderly slowdown.”
  • Dallas & Chicago Fed activity data, 2-Year Tsy supply and Fedspeak from Mester, Bostic, Collins & Logan headline domestic matters on Monday. Second-round Gilt reaction to Friday’s fiscal announcements and any fallout from BTPs surrounding the Italian election will be eyed in pre-NY dealing.