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Free AccessUS$ Credit Supply Pipeline
US Treasury Auction Calendar
US TSYS: NIRP Problem, 2021 FFs Pricing Neg Rates?!
US TSY SUMMARY: A lot of head scratching market moves Thu, Tsys rallied, long
end more than making up for the midweek refunding induced sell-off w/bonds back
to late Monday levels. Short end rallied as well: Fed fund futures covering 2021
surged >100.0, indicative of mkt pricing in negative rates; while equities
remained strong (ESM0 +49.0 late).
- Heavy volumes in FF futures, FFM1-FFQ1 up as much as 0.070 by midday, FFF1
trading near 100k. Dealer's offered opinions move won't last: UBS posits the
rally in FF is a likely dealer or fund stop out of positions vs. bank
portfolios. Decoupling should be short term, however, as "it is exceedingly
difficult to hold rates at those extreme levels for very long."
- Little react to multiple Fed speakers on day; some risk-off buying in minutes
after Senate majority leader McConnell said Senate likely to take up human
rights violation bill against China. (Aside, ECB pres Lagarde comments re: fear
of war and second wave of virus raised some eyebrows). The 2-Yr yield is down
4.4bps at 0.1349%, 5-Yr is down 7.3bps at 0.2991%, 10-Yr is down 7.3bps at
0.6298%, and 30-Yr is down 7.9bps at 1.3145%.
US TSYS/SUPPLY: Recap next week's Tsy bill auction schedule:
DATE TIME AMOUNT SECURITY (CUSIP)/ANNC
-------------------------------------------------
11 May 1130ET $63B 13W Bill 912796TD1
11 May 1130ET $54B 26W Bill 9127962Z1
11 May 1300ET $42B 3Y Note 912828ZP8
12 May 1130ET $65B 42D Bill 912796UA5
12 May 1130ET $35B 119D Bill 912796TJ8
12 May 1300ET $32B 10Y Note 912828ZQ6
13 May 1300ET $22B 30Y Bond 912810SN9
TSY FUTURES CLOSE: Broadly higher, just off late session highs after the bell
with bonds outperforming. In fact, the 30Y has completely reversed Wed's
refunding induced sell-off and are back to late Monday levels (30YY 1.319%). Yld
curves flatter. Update:
* 3M10Y -6.305, 52.047 (L: 50.433 / H: 59.606)
* 2Y10Y -2.777, 49.491 (L: 48.384 / H: 53.157)
* 2Y30Y -2.969, 118.422 (L: 117.229 / H: 123.46)
* 5Y30Y -0.018, 102.006 (L: 100.615 / H: 104.532); Current futures levels:
* Jun 2-Yr futures up 3.125/32 at 110-10 (L: 110-06.625 / H: 110-10.25)
* Jun 5-Yr futures up 12.75/32 at 125-24 (L: 125-10.5 / H: 125-25)
* Jun 10-Yr futures up 23/32 at 139-8.5 (L: 138-16 / H: 139-11)
* Jun 30-Yr futures up 2-12/32 at 181-03 (L: 178-22 / H: 181-11)
* Jun Ultra futures up 3-29/32 at 222-21 (L: 218-10 / H: 223-04)
US EURODLR FUTURES CLOSE: Broadly higher after the bell, at/near session highs
with short end lagging. Current White pack levels:
* Jun 20 +0.025 at 99.670
* Sep 20 +0.040 at 99.745
* Dec 20 +0.055 at 99.740
* Mar 21 +0.065 at 99.820
* Red Pack (Jun 21-Mar 22) +0.070 to +0.080
* Green Pack (Jun 22-Mar 23) +0.085 to +0.090
* Blue Pack (Jun 23-Mar 24) +0.085 to +0.090
* Gold Pack (Jun 24-Mar 25) +0.085 to +0.090
FED FUNDS FUTURES: *** It is a striking move! FFF'1 pricing in negative rate for
early 2021 as FFF1 surged 0.020 last few minutes to 100.005 high, heavy volume
over 54k before sector slips back to 99.995. FF Feb'21 through Sep'21 all
trading between 100.00-100.005 on more typical light volumes <5k. Negative rate
insurance anomaly? Widely placed opinion that negative rates still not expected
by trading desks.
FED FUNDS FUTURES: *** TD Securities addressing today's rally in 2021 FF futures
pricing in negative rates (strip still trading +0.045 to +0.060 currently vs.
+0.070 high). TD advising customers to fade the rally as move NOT "justified by
fundamentals as FOMC members have repeatedly stated that they do not expect to
take rates negative." Markets my be experiencing "a repositioning or short
squeeze" much like what happened in oil futures recently serial markets traded
deeply negative. "Even in a more dire economic scenario, the Fed would likely
favor YCC or forward guidance rather than negative rates (which affect money
funds and banks)" TD said, and expect the "Fed to push back against negative
rates in upcoming remarks." TD looks to sell FFN1 at 100.035 (sector had tapped
100.045 earlier, +0.070 on day).
FED FUNDS FUTURES: *** Holding out for negative rates given today's surge in FF
futures covering 2021 sector of curve? No going to happen, UBS strategists say.
- UBS said "there are 4.7T reasons why negative rates are much more problematic
in the US" as the MMF industries "business model would come under severe strain
if rates were negative." Reworking the MMF industry would be extremely
disruptive" and time consuming. "taking rates negative would mean a tightening
of financial conditions until the market structure evolved to a bank financed
framework."
- UBS posits the rally in FF is a likely dealer or fund stop out of positions
vs. bank portfolios. "Let's say a bank has assets where the interest rate can't
go through 0%. If they have that asset hedged with OIS or a LIBOR swap that can
go through 0%, there is a mismatch if rates go negative." W/some dealers as
counterparty, they hold "significant exposure to negative FF," while unwinds
"can temporarily push futures into negative rates that seem highly unlikely."
Decoupling should be short term, however, as "it is exceedingly difficult to
hold rates at those extreme levels for very long."
US DOLLAR LIBOR: Latest settles
* O/N -0.0015 at 0.0610% (+0.0026/wk)
* 1 Month -0.0236 to 0.1980% (-0.1053/wk)
* 3 Month -0.0130 to 0.4347% (-0.1062/wk)
* 6 Month -0.0064 to 0.6880% (-0.0250/wk)
* 1 Year -0.0154 to 0.7829% (-0.0526/wk)
US SWAPS: Spds running mixed well after the close, short end extending move
tighter as rate locks get lifted following another heavy day of swappable
corporate issuance. The long end, however, only mildly wider after extending
inversion on Wednesday's outsized refunding focus in longer durations that
include 20Y sector -- while bonds more than erase the midweek sell-off today,
bonds all the way back to late Monday levels, 30YY 1.314%. Latest spd levels:
Thu 1600 -1.06/+10.56 -0.25/+2.50 +0.25/-3.50 +0.75/-49.00
1300 -0.38/+11.25 +0.25/+3.00 +0.38/-3.38 +0.50/-49.25
1045 -0.25/+11.38 +0.19/+2.94 +0.25/-3.50 -0.38/-50.12
0915 -0.62/+11.00 -0.38/+2.38 -0.25/-4.00 -0.88/-50.62
Thu Open -0.38/+11.25 +0.00/+2.75 +0.00/-3.75 -0.88/-50.62
Thu 0630 -0.50/+11.12 +0.00/+2.75 +0.00/-3.75 -1.25/-51.00
Wed 1500 -0.50/+11.56 -1.50/+2.75 -3.00/-3.75 -3.00/-50.00
STIR: Federal Reserve Bank of New York EFFR for prior session:
* Daily Effective Fed Funds Rate: 0.05%, volume: $90B
* Daily Overnight Bank Funding Rate: 0.04%, volume: $216B
US TSYS: REPO REFERENCE RATES (rate, volume levels reflect prior session):
* Secured Overnight Financing Rate (SOFR): 0.05%, $1.127T
* Broad General Collateral Rate (BGCR): 0.04%, $473B
* Tri-Party General Collateral Rate (TGCR): 0.04%, $459B
FED: Recap NY Fed operational purchases for Thursday ($8.5B total)
* Tsy 20Y-30Y, $2.500B accepted, $5.711B submitted
* Tsy 4.5Y-7Y, $6.000B accepted, $14.275B submitted
NY Fed operational purchases schedule for Friday ($8B)
* 1010-1030ET: Tsy 2.25Y-4.5Y, appr $8B
OUTLOOK: *** US Data/speaker calendar (prior, estimate):
08-May 0830 Apr nonfarm payrolls (-701k, -21.75M)
08-May 0830 Apr private payrolls (-713k, -21.70M)
08-May 0830 Apr unemployment rate (4.4%, 16.0%)
08-May 0830 Apr average hourly earnings (0.4%, 0.4%)
08-May 0830 Apr average workweek, all workers (34.2hrs, 33.6hrs)
08-May 1000 Mar wholesale inventories (-1.0%, -1.0%)
08-May 1000 Mar wholesale sales (-0.8%, -3.0%)
08-May 1100 Q2 St. Louis Fed Real GDP Nowcast
08-May 1115 Q2 NY Fed GDP Nowcast
PIPELINE: Chevron launched $8B total 7pt jumbo late
Date $MM Issuer/Rating/Desc/Maturity/Yld; Priced *; Launch #
05/07 $8B #Chevron $1.2B 3Y +95/$300M 3Y FRN L+90, $2.5B 5Y +125, $1B 7Y +150,
$1.5B 10Y +160, $500M 20Y +165, $1B 30Y +175
05/07 $4B #GM $1B 3Y +525, $2B 5Y +585, $1B 7Y +635
05/07 $4B *IBRD/World Bank 10Y +35
05/07 $1.5B *Citigroup 4NC3 +150
05/07 $1B *HSBC Bank Canada 3Y +72
05/07 $1.25B #Zoetis $750M 10Y +145, $500M 30Y +175
05/07 $1.15B #Newcrest Finance 10Y +325a, 30Y +350a
05/07 $1B *Global Payments, 10Y +230
05/07 $900M #CAF 3Y +220
05/07 $700M #Federal Realty Inv Trust $300M 4Y +265, $400M 10Y +300
05/07 $500M Vulcan Materials 10Y +295
05/07 $500M *Mohawk Ind 10Y +300
05/07 $Benchmark Discovery Inc 10Y +300, 30Y +335
Eurodollar/Tsy options
Eurodollar options
Block, 1600:25ET, * 10,000 short Sep 96/98 risk reversals, 4.5/call over
* -55,000 Sep 97/98 1x2 call spds sold on day from cab up to 1.0
* 5,000 Blue Jun 95/96/97/98 call condors
* appr 5,000 short Jun 93/95/96/97 call condors trading outright after some 15k
sold vs. short Jul 96/97/98 call flys earlier
* 2,000 Dec 95/96 put spds
* +10,000 Jun 100/100.25 call spds, 3.0
* Update +18,300 Dec 98/100.12 call spds, 2.0
* 4,250 Jun 97/98/100.12 call flys, 0.5
* +14,750 short Jul 96/97/98 call flys 4.5 over short Jun 93/95/96/97 call
condors
* 2,500 Sep 98/100 call spds
Overnight trade includes,
* -10,000 Sep 97/98 1x2 call spds, 0.75
* +6,000 Jun 95/96 2x1 put spds, 1.25
* +5,000 Dec 98/100.12 call spds, 2.0
* 2,400 Jun 95/96/97 call trees
Tsy options
* +3,000 FVQ 127 calls, 7/64
* +5,000 TYN 141 calls, 10/64 earlier
Block, 1120:35ET,* 9,413 TYM/TYN 139.5 call spds, 16/64 net
* scale seller some -2,000 TYN 139.5 calls, 25- to 26/64, ongoing theme for some
desks to fade underlying moves via wing sales of late: selling low delta
calls/puts on rallies/sell-offs.
* 1,000 TYN 135/137 put spds after appr 2,250 TYN 137 puts traded 21/64
--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com
[TOPICS: MTABLE,M$U$$$,M$$FI$,MN$FI$,MN$FX$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.