Bonds marginally lower, led by long-end, mostly tracking Bunds

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OVERNIGHT TREASURIES

•Bonds marginally lower, led by long-end, mostly tracking Bunds
•Moderate volume, 167k 10-year futures trade by 06:29 EST
•September 10s trade 133-10.5/133-01 overnight, 133-04 last
•Asian accounts lift several dealers out of belly from London lows
•Talk domestic accounts sell long-end
•10s trade in a range of 1.633% and 1.661% overnight.
•USTs underperforming EGBs by 3.3bp in the 10yr maturity compared to the previous London close.

MARKET BIAS

•The tactical bias is as a neutral/supportive after the FOMC verdict but with an eye on Europe.
•Look for a 1.70% to 1.60% range in 10s.
•The strategic bias is long a 50% position in bonds at 2.753%.
• The curve bias but favors flatteners on any notable correction and entered a 5s/10s flattener at 91.2 bps and a 10s/30s steepener (pre-FOMC) at 111 bps looking to exit in next week’s 5-year auction.

TECHNICAL OVERVIEW

DATA

•08:30 Initial Claims (wk Jun 16) (mkt 380k, prev 386k)
•08:30 Continuing Claims (wk Jun 9) (mkt 3.280 mln, prev 3.278 mln)
•09:00 Markit PMI (flash June) (mkt 53.0, prev 54.0)
•10:00 Existing Home Sales (May) (mkt 4.570 mln, prev 4.620 mln)
•10:00 FHFA House Price Index (Apr) (prev -2.7% y/y)
•10:00 Leading Indicators (May) (mkt +0.1% m/m, prev -0.1% m/m)
•10:00 Philly Fed Mfg Survey (Jun) (mkt 0.0, prev -5.8)

EVENTS

•11:00 Fed outright Treasury coupon purchase (06/30/2018 – 05/15/2020) (e: $4.25 – $5.25 bln)

ISSUANCE

•Freddie Mac reference note announcement
•11:00 Treasury announces 3- and 6-month, 52-week bills (e: $30/27/25 bln)
•11:00 Treasury announces 2-, 5- and 7-year notes (e: $35/35/29 bln)
•13:00 Treasury auctions $7 bln reopened 30-year TIPS

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