OVERNIGHT TREASURIES
•Bonds continue higher overnight, helped along by good Japanese/Asian buying
•Moderately good volume, especially for a quiet overnight August Friday, 160k 10-year futures trade by 06:30 EST
•Asian accounts lift 10s, Japanese accounts lift fives on out curve, including spread product/MBS
•September 10s trade 133-26.5/133-12 overnight
•10s trade in a range of 1.637% and 1.652% overnight.
•USTs underperforming EGBs by 3bp in the 10yr maturity compared to the previous London close.
MARKET BIAS
•The tactical bias supportive and favors the buying of dips now that supply has passed and the Fed coupon passes are set to resume early next week.
•Look for a range of 1.71% to 1.63% in WI 10s.
•The strategic bias sold the auction long WI 30s position at 2.77% from 2.825% for a 5.2 bps profit after covering a pre-auction short in the auction for a 2.8 bps profit.
•The curve bias is in a 5s/WI 30s flattener out of the auction at 207. 6 bps after legging out of a 5s/30s steepener from 203 bps into the bond auction at 206 bps for a 3 bps profit.
TECHNICAL OVERVIEW
DATA
•08:30 Import Prices (Jul) (mkt +0.1% m/m, prev -2.7% m/m)
•14:00 Treasury Budget (Jul) (mkt -$103.0 bln, prev -$129.4 bln)
EVENTS
•11:00 Fed outright Treasury coupon sale (07/15/2013 – 01/31/2014) (e: $7.00 – $8.00 bln)
