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Bunds drag bonds slightly higher overnight, belly outperforms

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•Bunds drag bonds slightly higher overnight, belly outperforms
•Light volume away from calendar roll trading; 194k September 10s trade against 111k December
•Widespread talk of receiving in fives, derivatives related receiving in belly helps, Asian accounts lift belly, 10s, too
•Asian accounts let go of front-end, fives meet good selling into strength before $35 bln five-year note auction
•USTs underperforming bunds by 2bp in the 10yr maturity compared to the previous London close


•The tactical bias is neutral, looking to be supportive into the buybacks and then defensive into the auctions.
•Look for a 1.65%-to-1.58% range in 10s.
•The strategic bias is long a 50% position in 5-year TIPS at -1.286%, versus a 50% short in 10s at 1.671%. A 50% position in 5-year TIPS from -1.286% was sold at -1.34% versus covering a 50% short in the 5-year from 0.671% at 0.666% for a 4.9 bps profit.
•The curve bias is flat.



•07:00 MBA Mortgage Applications Index (prev -7.4%w/w)
•08:30 Real GDP (Q2 prelim) (mkt 1.7% AR, prev 1.5% AR)
•08:30 Core PCE Deflator (Q2 prelim) (mkt 1.8% AR, prev 1.8% AR)
•08:30 Real Final Sales (Q2 prelim) (mkt 1.6% AR, prev 1.2% AR)
•10:00 Pending Home Sales Index (Jul) (mkt 1.0%, prev -1.4%)


•11:00 Fed outright Treasury coupon purchase (08/31/2018 – 08/15/2020) (e: $4.25 – $5.00 bln)
•14:00 Fed releases Beige Book


•11:30 Treasury auctions $35 bln 18-day CMBs
•13:00 Treasury auctions $35 bln 5-year notes




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