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GILTS

Opening calls

SOUTH AFRICA

SAGBs Firm at the Open, Risk Premia Ease W/W

USD

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The Treasury re-opens the 30Y Bond (912810SX7) Thursday for $24B, in the last auction of the week.

  • Background: This auction comes a few hours after another above-consensus inflation reading which has re-steepened the curve a bit after recent flattening. 2s30s hit 3-month lows this morning just below 200bps, but rebounded to nearly 205bps after the May inflation report.
  • That's faded to 203bp, but unlike Wednesday's 10-Yr sale, there has at least been a modest concession on the day; WI around 2.17% currently, up 0.5bp. And there's a bit more inflation priced in (implied breakeven up 2.8bps). But that's hovering just above the lowest yield since early March, touching 2.15% yesterday, so overall, strong CPI data has had fairly limited impact.
  • While the coming-and-going of CPI means data risk is largely out of the way for the next few sessions, there's of course event risk with the FOMC decision next Wednesday. Though yesterday's decent 10Y auction suggested there's still long-end demand at these levels.
  • Auction history: The 30Y last sold on May 13, with mixed/weak stats, including a 1.8bp tail, 2.22x cover (vs 2.4x average for the previous four auctions) and dealer bidding on the high side (20.0% of takeup, vs 18.2% for the previous 4 auctions). This followed a strong auction on Apr 13 (1.5bp trade through, 2.47x cover).
  • Timing: Results available shortly after competitive auction closes at 1300ET.

Last 5 30Y Auctions Average:

High yield When-issued yield Trade through (tail) High - Median Spread Bid-to-cover Primary Dealer Percent Indirect Percent Direct Percent Offering Amount
2.154% 2.153% -0.1 5.9 2.32 18.54% 62.08% 19.35% 25.2