Rates Weaker/Off Lows

Tsys finished the session weaker but off midday lows. Rates followed Bunds, Gilts lower in early trade after BoE Vlieghe commented early rate hikes possible if there is a smooth furlough transition. Sideways trade after first significant data of wk: Durable goods weaker than expected, though higher revisions. Initial jobless claims slightly better than expected, while GDP unch in latest reading (vs expectations of 0.1pp revision higher).

• Bonds lead a gradual move lower, yld curves bear steepening in late morning trade. TYM1 -9.5/32, 132-19.5 last, still well above April 13/29 key support of 131-18.5. Trading desks noted two-way positioning w/better selling from props and real$ accts, central bank buying in 10s earlier. Curve-wise, trading desks report real- and fast$ doing 5s30s steepeners. No deal-tied flows with corporate issuers sidelined ahead shortened Friday/extended holiday weekend. Some pre-auction short-sets ahead final leg week's Tsy supply: $62B 7Y note.
• Decent auction results w/ high yield of 1.285% vs. 1.292% WI. Tsys holding off session lows. Bid-to-cover: 2.41x well over 2.24x 5 month avg, and highest since Sep '20. Indirect take-up of 59.57 well over the 5 month average of 55.35% but well shy of Jan's 64.09%. Primary dealer take-up 19.73% well below 25.83% 5 month avg (compares to February's >1Y high of 39.80%.) Direct take-up picks up of 20.70 vs. 18.79% 5M avg.
• The 2-Yr yield is down 0.4bps at 0.1446%, 5-Yr is up 3.2bps at 0.8139%, 10-Yr is up 3.2bps at 1.6079%, and 30-Yr is up 3.2bps at 2.2882%.