OVERNIGHT TREASURIES

·Bonds down by Bunds after weak 10-year Bund auction
·Big volume again, 200k 10-year futures trade by 06:27 EST
·Belly leads way lower
·Light profit taking from Japan/Asia in belly, long-end, fast money sells 10s
·10-yr yields in range of 1.995% and 2.025% overnight
·USTs outperforming EGBs by 3.7bp in the 10yr maturity compared to the previous London close.

MARKET BIAS

·The tactical bias is neutral/defensive looking for a shorting opportunity ahead of the 10 & 30-year supply.
·Look for a 2.03% to 1.93% range in 10s.
·The strategic bias is flat.
·The curve bias is in a 7s/30s flattener at 172.8 bps.

TECHNICAL OVERVIEW

DATA

·07:00 MBA Mortgage Purchase Applications Index (wk Apr 6) (prev +7.2% w/w)
·08:30 Import Prices (Mar) (mkt +0.8% m/m, prev +0.4% m/m)
·14:00 Treasury Budget (Mar) (mkt -$196.0 bln, prev -$188.2 bln)

EVENTS

·08:20 FRB Atlanta’s Lockhart (voter, moderate) further remarks at 2012 Financial Markets Conf.; Stone Mountain, GA
·09:30 FRB Kansas City’s George (non-voter) to speak in NYC
·10:15 Fed outright Treasury coupon sale (07/15/2012 – 01/31/2013) (e: $8.00 – 8.75 bln)
·10:30 FRB Boston’s Rosengren (non-voter, dove) on money market funds; Stone Mountain, GA
·12:00 FRB Atlanta’s Lockhart (voter, moderate) closing remarks at 2012 Financial Markets Conf.; Stone Mountain, GA
·14:00 Beige Book
·17:00 FRB St. Louis’s Bullard (non-voter, hawk) welcoming remarks before Homer Jones Memorial Lecture
·18:15 Fed Vice Chair Yellen (voter, dove) on the outlook and monetary policy; NYC

ISSUANCE

·Freddie Mac reference note announcement
·13:00 Treasury auctions $21 bln 10-year notes