ITC Meeting- CB buying, Japanese RM extensions. 5s30s stops
30/07/2010 06:27:11
The Calendar- attahced- includes:- Economic data, the consensus and previous 3- Supply, coups/redemptions and futures equivs- Equity Calendar- Global Key events- Expiration Calendar- Month-end Index ExtensionsITC Fixed Income Morning Meeting: Bunds to open around 128.19 (+13), Bobls at 119.84 (+12), Schatz at 109.165 (+5)- UST NY Recap: The belly of the curve outperformed again, 2y, 5y and 10y ending the day lower by 1.6bp, 4.1bp and 0.1bp, respectively. The 30y rate ended the day 1.2bp higher as more curve flattener positions were UNWOUND.The Treasury auctioned $29bn 7s, which was met with weak demand. The auction tailed by 2bp, whereas the last auction came through by 0.5bp. The bid-to-cover ratio fell to 2.39 from 3.01 in June, below the 12-month average (2.8). Broker/dealers absorbed 48.8% of the auction, compared with 39.2% in June, due to an 8% decline in the indirect bidding rate.- USTs in Tokyo: many reports of month-end buying/extensions and JPY fund related buying (talk of large Eur/Jpy 15bn Spanish redemptions on Monday is weighing on JPY). More JPY buying of USTs is expected in London (and extensions). FLOWS: Japanese RM buying of 5s and 7s, Central Bank buying of Bills and 3yr. More talk of stop outs on 5s30s, so we'll be watching this spread again today. The 10s30s curve steepened 1.3bp. In addition to forced unwinds, lower intermediate yields and fiscal concerns seem to be the factors behind this move. The tightening of long-dated swap spread also conveys the message of a market concerned about fiscal issues. Desks remain cautious about fading the steepening.- Barcap US Month-End Index Extensions: US +0.06, MBS +0.08, Agncy +0.08, Agg +0.07 - European Fixed Income: Today brings the well advertised (and large) month-end index extensions will will almost certainly underpin the mkttoday- and we may see RM flows intensify after the Chicago PMI, into the 4.15BST cash closes. Weak equites will also underpin, with many in the mkt nervous of the US- one notable trade that was noticed by the market yesterday was the 12k buyer of SPX Sep 1000 puts (12,000 lots- 1.25 MM vega,235 MM delta). German retail sales, Italian PPI & CPI and Eurozone jobless rate is the pick of Friday's data calendar which also sees releases from Spain, Portugal, Belgium and Greece. Switzerland's KOF leading indicators (at 10.30bst) is also for a look as it's been known to move Bunds in the past. Recall, there are no ECB officials carded to appear on the ECB's weekly schedule this side of the weekend. Moreover, the looming ECB GC meeting next Thursday will see Mr T's Purdah period handcuff remarks on current monpol.- Gilts: Sizeable rebalancing today. Recall, the UK iBoxx one-year and over index should see a sizeable +0.17yrs rebasing as UKT9 7/11 rolls out andUKT4.25 12/40 enters the index.Barcap Sterling Gilts extension at 0.10 years, U.K. Gilt Linker Index extension at 0.36 years.- Barcap European Month-End Index Extensions: Europe +0.13 years, UK +0.08 years.
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