Monday’s Rally Extends On First Republic Earnings

TYM3 ticks above Monday’s late high at the re-open, last dealing +0-08 at 115-04. The contract has breached Friday’s peak. The break and close above 115-00 eases the bearish technical threat, with bulls now targeting the 14 Apr high (115-23).

• Meanwhile, the major cash Tsy benchmarks were 7-10bp richer on Monday, as the curve bull steepened.
• Tsys went out at session bests, with the richening extending late in the day as First Republic reported quarterly earnings, revealing the extent of the well-documented headwinds it has faced in recent weeks (centred on deposit flight), while it removed its previous guidance, refused to answer questions in the post-results earnings call and noted that it is pursuing “strategic options.” FRC shares fell 18% post-market after rallying 12% on Monday.
• This built on the early NY rally that was inspired by much softer than expected Dallas Fed m’fing activity data. The rally was notable given the light cheapening witnessed in UK & German bonds, with those moves aided by an uptick in BoE & ECB STIR pricing re: hikes.
• ‘X-Date’ discussions also continued.
• We don’t have anything in the way of meaningful risk events slated during Asia-Pac hours, which will likely leave regional reaction to First Republic’s earnings and gyrations in Chinese equities front and centre. ECB & BoE speak will then come under the microscope during the London morning. Further out, NY hours will see the release of new home sales data, a couple of the major home price metrics, consumer confidence. services activity indicators from the Philly & Dallas Feds and the Richmond Fed m’fing index. We will also get 2-Year Tsy supply.