ITC F.I: Bunds. Big French coups/redemps Wednesday. Large +ive cashflows
By ITC Markets
Mon 22 Jul 2013 03:00:52 CT
ITC Fixed Income Morning Meeting: Buxl to open around 131.04, Bunds at 144.22, Bobls at 126.59, Schatz at 110.575
- UST NY Recap: PBOC move helps risk. Supply Flat'rs Dominate Activity. The treasury curve bull flattened on Friday as 5y, 10y and 30y yields fell by 2.6bps, 3.7bps and 5.4bps, respectively. In-line with press speculation, PBOC announced that china will scrap the bank lending rate floor. The decision sent risk-on ripples through markets, as analysts saw the move as a positive message of reform from the PBOC. The move saw AUD rallying initially, followed by equities (led by miners) and weighed on core fixed income, allowing Euribors to bear steepen. With no economic data of note and poor summer liquidity, light flows pushed around the market. Given belly supply/buy-back metrics we heard dealer putting on flat'r in 5s10s and 5s30s. Lev'd joined the play in 5s10s later in good size which put supported 10s. We heard RM buying of 7s and 10s from the lows, and other FM selling the belly outright. MBS held in well edging tighter vs rates on light supply and some official buying. No issuance of note. Very quiet session overall.
- US Swap EOD Commentary: Spreads were mixed on the session, though none closing more than 0.5bp away from where we opened. We heard better exotic-related REC in the long-end in Asia on Friday, and a couple of bits of rate lock paying in the belly in NY. We heard FM guys exiting spread longs in the belly, initially out on as issuance play but now bailing ahead of belly supply. Other lev'd guys took profit on step'rs. The session was very quiet in swap space w/ no issuance of note.
- US Fed Ops: the Fed is scheduled to purchase $1.25-1.75bn in the 20-30y sector.
- USTs in Tokyo: TY 127.09 +6, SP 15519 +13, Eur 1.3157 +18, Jpy 99.90 -31, Nik 14530 -120
- RBS on Japan: The ruling coalition's landslide victory was widely anticipated because of a clear LDP advantage. Hence, investors are unlikely to have been surprised by the outcome.
- Issuance Outlook: The week saw around $29bn in new issues priced, with initial thoughts from desks are for a busier period next week w/ as we hear decent number Yankee deals already in the pipeline. Will update with some formal estimates when they become available.
- US Supply: The Treasury will auction 2y, 5y, & 7y for $99.0bn. Net cash flow is negative with no coupons or redemptions to be repaid. The Fed will purchase up to $5.25bn in the 23-30y, up to $5.25bn in the 4y-4y 8m sector & up to $3.75bn in the 6y-7y sector.
- European Fixed Income: Bunds to open around 144.22 Ref 127.09+ TY
- EGB Supply: Europe sees an estimated €6bn-govie supply of €6bn / approx 41k Bund futures equivalent, from Netherlands (8y & 29y Tuesday) & Italy (2y & 13y (TBC), Friday). The EFSF will also issue a 3y benchmark via Syndication for an expected €4.0bn. Net cash-flow for this week is positive with €17.8bn coupons & redemptions to be repaid from France (Wednesday).
- UK Gilts: The UK will issue a 31y Linker Tap via Syndication for an expected £1.5bn Net cash-flow for this week is flat with no coupons or redemptions to be repaid.
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