Bonds marginally lower led by long-end profit taking after bank downgrades

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OVERNIGHT TREASURIES

•Bonds marginally lower led by long-end profit taking after bank downgrades
•Volumes slide on lack of data and China holiday, 115k 10-year futures trade by 06:15 EST
•Asian accounts tentative 10-year sellers booking early profits
•10s trade in a range of 1.613% and 1.637% overnight.
•USTs underperforming EGBs by 1.5bp in the 10yr maturity compared to the previous London close.

MARKET BIAS

•The tactical bias is as a supportive dip buyer, with an eye on Europe.
•Look for a 1.64% to 1.56% range in 10s.
•The strategic bias is flat after selling out a 50% long in bonds from 2.753% at 2.718% for a 3.5 bps profit.
• The curve bias is flat, but favors flatteners. A 5s/10s flattener from 91.2 bps was unwound at 88.7 bps and a 10s/30s steepener from 111 bps was exited at 107.1 bps for a combined 1.4 bps loss.

TECHNICAL OVERVIEW

EVENTS

•11:00 Fed outright Treasury coupon purchase (02/15/2036 – 05/15/2042) (e: $1.50 – $2.25 bln)

ISSUANCE

•Province of Ontario, 10yr global bmk; DB / GS / JPM / TD, m/s +70bp

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