Bonds modestly lower in quiet trading overnight as risk markets go “on”

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•Bonds modestly lower in quiet trading overnight as risk markets go “on”
•Volume light, 113k 10-year futures trade by 06:24 EST
•Mixed flows from Asia, selling 10s, bits of buying in belly, better buying longer end
•September 10s trade 134-04/133-29.5
•10s trade in a range of 1.560% and 1.582% overnight.
•USTs underperforming EGBs by 0.5bp in the 10yr maturity compared to the previous London close.


•The tactical bias is defensive heading into the Refunding, favoring the selling of strength in the range to cover later in the week.
•Look for a range of 1.61% to 1.53% in 10s.
•The strategic bias looks to sell strength into the Refunding and sold a 50% position in the bond at 2.63% and covered at 2.637% looking to sell into the upcoming coupon passes.
•The curve bias favors steepeners into the Refunding and entered a 5s/10s steepener at 89.4 bps



•07:45 ICSC/GS Chain Store Sales (wk Aug 4) (prev +1.8% y/y)
•08:55 Redbook Same Store Sales (wk Aug 4) (prev +1.1% y/y)
•10:00 JOLTS (Jun)
•15:00 Consumer Credit (Jun) (mkt +$11.00 bln, prev +$17.12 bln)


•11:00 Fed outright Treasury coupon purchase (08/15/2018 – 05/15/2020) (e: $4.25 – $5.00 bln)


•11:30 Treasury auctions $40 bln 4-week bills
•13:00 Treasury auctions $32 bln 3-year notes

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