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Firmer Ahead Tuesday Data, ECB CB Forum in Sintra, Portugal

US TSYS
  • Treasury futures holding modestly firmer after the bell, near the lower half of a narrow session range - no particular headline driver for futures reversal off early session highs, however.
  • Some factors at play. however, included incoming Treasury auctions ($65B 13W, $58B 26W bill auctions, $42B 2Y Note auction -- trades through: 4.670% high yield vs. 4.680% WI), while a pick-up in high-grade corporate debt issuance could be a factor for the dip in Treasury futures amid rate lock-hedge sales.
  • Early month/quarter-end positioning also mentioned, with nascent asset allocation from Treasury futures to stocks. Underscoring this morning's retreat, the Sep'23 10Y contract trend outlook remains bearish. Recently, support at 112-29+, the May 26 / 30 low.
  • Treasury curves extend inversion this morning, 2s10s taps -104.521 low, nearing March 40+ low around -111.0. “Although the cash curves are closing in on recent troughs," Goldman Sachs analysts write the "OIS and SOFR swap curves are still some distance away. Some of this weakness is likely the result of an anticipation of heavy front-end supply, but we expect it will not remain contained to front-end swap spreads as the full extent of supply increases becomes clear.”
  • Economic data picks Tuesday: Durable Goods, Housing Metrics, Cons Confidence. While there is a dearth of scheduled Fed speakers Tuesday, attention will be on the ECB's forum on central banking in Sintra, Portugal that kicks off tonight with ECB Pres Lagarde. LINK.
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