Long-end “on fire” as mkt rallies on Euro fears

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OVERNIGHT TREASURIES

•Long-end “on fire” as mkt rallies on Euro fears
•Moderate volume, good for quiet summer Monday, 165k 10-year futures trade by 06:26 EST
•September 10s trade 135-12/134/30 overnight, 135-10 last
•10s/30s block trade stands out in futures, 10k 10s against 5k bonds, flattener assumed
•Domestic accounts lift long-end, talk Asian buying 10s but not widely seen, other flows more mixed and sporadic

MARKET BIAS

•The tactical bias is supportive favoring the buying of dips as Europe’s crisis threatens to flare into another systemic contagion.
•Look for a range of 1.45%-to-1.36% in 10s.
•The strategic bias is flat after covering a 50% short in 10s from 1.50% at 1.48%.
•The curve bias is in a 5s/7s steepener at 37 bps looking to unwind at 40 bps or in the upcoming 7-year auction.

TECHNICAL OVERVIEW

DATA

•08:30 Chicago Fed National Activity Index (Jun) (prev -0.45)

EVENTS

•11:00 Fed outright Treasury coupon purchase (07/31/2018 – 05/15/2020) (e: $4.25 – $5.00 bln)

ISSUANCE

•11:00 Treasury announces 4-week bills (e: $35 bln)
•11:30 Treasury auctions $30 bln 3- and $27 bln 6-month bills

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