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Treasuries Follow Europe Richer, 3Y Auction

US TSYS
  • Cash Tsys in the European session have more than unwound a net cheapening overnight through a combination of a dovish BoJ pledging a continuation of easing to support the economy and a hawkish RBA surprisingly hiking 50bps.
  • The driving force appears to be Europe and Germany in particular, where yields have pulled back from yesterday’s new cycle highs (since 2011 for 2Y, 2014 for 10Y).
  • Despite rallying, Tsy yields still sit above 3% through 5-30Y tenors: 2YY -1.6bps at 2.710%, 5YY -2.6bps at 3.008%, 10YY -2.6bps at 3.014% and 30YY -3.2bps at 3.164%.
  • TYU2 sits 6 ticks higher at 118-03 in a return on above average volumes. It’s still well within yesterday’s range though as it continues to suggest the corrective cycle since May 9 is over whilst notably below the 50-day EMA of 120-04+. The intraday low of 117-22+ forms initial support after which it could ultimately open a bear trigger at 116-21 (May 9 low).
  • Data/speak: Trade balance and consumer credit plus Tsy Sec Yellen speaks at the Senate Budget hearing at 1000ET.
  • Bond issuance: US Tsy $44B 3Y note auction (91282CEU1) – 1300ET
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