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Rates Weaker/Off Lows

US TSYS SUMMARY

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%.

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