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Tsy Turn Weaker Late, US$ Tops Pandemic Peak, Earnings Continue

US TSYS

Rates trade weaker across the board after the bell -- short end support evaporating late as broader markets watch the surge in US$ strength, DXY $ index +.684 at 102.986 vs. 103.282 high -- 5-year highs as it breached pandemic peak of around 102.992 earlier.

  • Confluence of likely drivers: ongoing adjustment in Fed tightening cycle - rush to neutral, safe haven, month-end, and knock on efforts from PBoC to counter CNY strength/promote domestic growth all amid lack of market depth.
  • FI futures had traded firmer after huge miss in March goods trade balance this morning: record deficit of -125.3B vs -106.3B expected. While exports climbed 7.2%, imports surged 11.5% MoM.
  • Curve steepening had already been underway prior to the mildly weak 5Y auction (2.785% high yld vs. 2.777 WI), primary dealer take-up of 16.52% said to "soften the sting" of drop in bid-to-cover from 2.53x to 2.41x.
  • Late focus turned to slew of new earnings after the close: Invitation Homes (INVH), Raymond James (RJF), Qualcomm (QCOM), Amgen (AMGN), Ford (F), Meta (FB), PayPal (PYPL) to name a few.
  • On tap for Thursday: Weekly Claims, GDP, KC Fed Mfg index and $44B 7Y Note Sale.
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