Thursday, Jan 05, 2012

OVERNIGHT TREASURIES

* Dragged around by Bunds in mostly quiet trading, 130k 10-year futures trade by 06:32 EST
* Long-end leads way higher, customer flows mostly light and mixed
* USTs underperforming EGBs by 2.4bp in the 10yr maturity compared to the previous
London close.
* 10s trade in a range of 1.993% and 1.960% overnight.

MARKET BIAS

* The tactical bias is that of a defensive range trader favoring the selling of strength in 10s and
30s.
* Look for a 2.04% to 1.94% range in 10s.
* The strategic bias is flat but will look to sell a 50% position in 10s at 1.94%.
* The curve bias is flat but favors steepeners involving fading the bond into next week’s
auctions.

TECHNICAL OVERVIEW

DATA

* 07:30 Challenger Job Cuts (Dec) (prev 42.5k)
* 08:15 ADP Employment Report (Dec) (mkt +178k, prev +206k)
* 08:30 Initial Claims (wk 12/31) (mkt 375k, prev 381k)
* 08:30 Continuing Claims (wk 12/24) (mkt 3.580 mln, prev 3.601 mln)
* ICSC Chain Store Sales (Dec) (prev +3.2% y/y)
* 10:00 ISM Non-Manufacturing Index (Dec) (mkt 53.0, prev 52.0)

EVENTS

* 10:15 Fed outright Treasury TIPS sale (04/15/2012-04/15/2014) (e: $1.00-1.50
bln)

ISSUANCE

* 11:00 Treasury announces 3- and 6-month, 52-week bills (e: $29/27/25 bln)
* 11:00 Treasury announces 3- and 10-year notes and 30-year bonds (e: $32/21/13
bln)
* SMBC, 3,5 & 10-year; BC/C/GS/SMBC Nikko
* KfW, 3-yr BC/GS/JPM; m/s +25bp area