Iran Conflict Spikes Oil, Threatens UST Long‑end Auctions
This is a high-stakes week for the bond market. The recent spike in crude prices - fueled by the conflict in Iran - will show up in March’s inflation data. The consensus on Wall Street is a headline print of 1%. But even before that number hits, USTs have another hurdle to clear: long-end auctions, which are looking like a serious headwind.
Quiet Market Ahead of March Payroll; Globex Closes Early
Cozy mini market day for the release of the March payroll report. Globex closes at 11:15 am for Good Friday
Markets React to Labor Data; ADP Beat Nudges Yields
Market will be sensitive to labor market data. A smallish ADP beat pressuring Ts a bit
April Tax Season Squeezes Liquidity, Hits USTs
It's quarter-end with a smallish duration extension later today. More importantly a reminder that April is the cruelest month for USTs as tax payment season liquidity squeeze generally pressures financial assets https://t.co/k7egjG0Wku
Markets Price 5bps of Rate Cuts This Year
Cuts winning out vs hikes now. Market net pricing 5 bps of cuts this year https://t.co/jSHybRo8Ni
Fed Funds Futures Return to Normal, Near‑Term Hike Priced Out
Fed funds futures mostly back to "normal" as the near term rate hike gets priced out. Live chart vs last Thurs. https://t.co/F0dnQCJ9pu
Inflation Swap Forward Gauge Peaks, Now Weakening on Downside Risks
Think of the 1-year forward 1-year inflation swap as a market gauge for the current inflation vs growth battle. At the start of the war, the forward measure surged higher along with the current 1-year swap as inflation concerns dominated, but...
Trump Claims Middle East Nearing Freedom From Iranian Terror
U.S. President Donald Trump: "Tonight, we are closer than ever to the rise of the Middle East that is finally free from Iranian terror and aggression."
STIRs Reveal Uncertainty: Inflation vs Growth Slowdown
Not often you see STIRs trying to price hikes and cuts at the same time, but that is the current level of uncertainty. What will dominate in the next few months, inflation or a growth slowdown? Get...
5s Belly Pressure Rises as Back Side Flattens
And finally looking at the broad curve, belly (5s) has been under pressure past few weeks mostly driven by the flattening on the back side. Not a fan of 5s generally but it has cheapened a bunch and is...
5‑Year SOFR Swap Spreads Dip Below
5y SOFR swap spreads have been heavy lately and just narrowed below -35 bps. Tactically good level IMO esp with the possibility of reg relief soon https://t.co/fjvHI7HVCz
Steepener Trade Finds Relief as Front‑end Yields Rise
The UST 2s5s steepener has been my 'white whale' trade the past year, facing constant pressure from shifting macro drivers. It was first flattened by the AI disruption trade, then crushed by the surge in front-end yields following the outbreak...
5s30s
5s30s just took out the low from Monday. Back end flattening aggressively post auction https://t.co/KwTSaaxDhY
Weekend Angst Pushes 2s and 5s to Daily Lows
2s and 5s low of the day before the 7yr auction. Not too surprising after two tailing auctions but obviously weekend angst major driver.
Israel Kills IRGC Navy Commander; Tension Spikes at Strait
Israel eliminated Alireza Tangsiri, commander of the IRGC Navy, in last night's airstrikes. All eyes on the strait
5-Year UST Auction Likely Tough After Poor 2-Year
UST 5y auction will be interesting after a nasty 2y yesterday. Some news cross-currents may have affected clean bidding for 2s which should be a factor for 5s today as well. Also more of a concession would be...
Supply Pressure Keeps Rates Elevated Amid Fed Pause
UST and IG supply will be an added headwind for rates this week. The whole curve is trading above the Fed's overnight target range as rate cuts go on pause for now and hedging for a near term rate increase...
USTs Open Rough; Front-End Pressure
Nasty open for USTs with front-end under the most pressure. 2y futs off 3.5 ticks
Trump Uses Iran Grid Threat to Bait NATO
Is Trump’s threat to destroy Iran's power grid a gambit to pull NATO and Europe into the Strait of Hormuz? It’s a smart leverage point, given that Europe and Turkey are the ones most vulnerable to a new refugee crisis.
Waller Warns Oil Could Eventually Lift Core Inflation
Waller having his own personal Trichet moment: "oil can bleed through to core inflation at some point"
Europe/UK Rate Hike Likely: 12% April Odds
Europe/UK back at it, forcing their rate hikes on us. April hike odds 12%... more than just noise
UK’s Repeated Crises Undermine Global Economic Stability
Why is the UK always the source of curve instability? Brexit, Truss and now this
Powell's Hawkish Tone Signals No Rate Cuts Yet
That was a hawkish presser. JP discounted the latest NFP print and revisions. Spent time discussing rate hikes even if hypothetical. Highlighted anchored inflation expectation as a prerequisite for further rate cuts.
Powell's Low Job Breakeven Comment Pushes USTs Down
USTs pressured lower by Powell's comment that breakeven rate for new jobs is very low
FOMC Day May Reset Market’s Minimal Cut Outlook
FOMC day and "extended pause" hedging pressuring whites. 2026 cuts down to 23 bps. Of course, Fed has an opportunity reset all of this via FOMC statement, SEP, and presser. Should be a fun day https://t.co/pMoJFfaIiY
Fed's Inflation View to Steer Near‑term Rate Path
Despite the recent steepening of the back-end, hard to fade and set up for next week's auctions with FOMC tomorrow. Fed clarification on how they view the recent crude inflation will have a strong impact on the...
Sell‑side Fades War‑Inflation Trade, Energy Seen as Growth Killer
Sell-side is fading the war-inflation trade in the front end. The consensus? High energy prices are a growth killer, not a long-term inflation driver. For now, the tape is happy to ignore them.
Markets Stay Calm on 5-Year Inflation Outlook
Market relatively sanguine about longer term inflation. 5 year, 5 year forward inflation swap showing no angst despite crude elevating front short-term swaps https://t.co/b8Po5HE6EV
Fed Stalls Amid One‑Time War Inflation, Awaiting SEP Clarity
Fed's in a tough position here. Labor market and economy in general need a bit of TLC but war inflation may be one too many one-time price level increase. Default reaction will be no reaction for now. FOMC...
Iran War Inflation Drives Terminal Rate to 3.37%
Iran war inflation continues to push up the terminal rate, now 3.37. This had been trading around 3% a month ago. No surprise UST front end getting shellacked with 2s 3.74 and 5s 3.86 https://t.co/8FiC830XW4
Fed Rate Path Repriced: Terminal Rate 3
Rather dramatic repricing of the Fed rate path vs 3 weeks ago before the Iran war. Cut cycle terminal rate now 3.28 with odds increasing that cut cycle is already over https://t.co/VYJRS9oWdI
UST 2s Offer Yield Above SOFR Funding Rate
Generally, this has been good value for UST 2s. Chart of yield less funding rate (SOFR) https://t.co/jPLWuxmxaW
USTs Slide as Record IG Issuance Fuels Supply Pressure
Oddly USTs under pressure ahead of what is expected to be a soft Feb CPI (0.2 core) print. Supply seems to be part of it. Yesterday's 11-deal IG issuance ($66B) was the biggest single session on record.
2s5s Rebounds Sharply After Weak NFP Data
2s5s had been under relentless pressure in the past month (AI disruption and all) but finally a surge steeper after that weak a&& NFP print https://t.co/fYJGpdBc5q
UST Funding Strain Grows as 30‑Year Swap Spread Hits
UST funding pressure starting to ramp up as swap spreads narrow 3-4 bps across the curve. 30y tenor now less than -78 bps https://t.co/yWt8DEzUEr
Rising Oil Prices Force Fed to Pause, Trim 2026 Cuts
Surging crude prices (bottom chart) make "pause" the Fed's default position. 2026 rate cuts down to 39 bps (top chart) https://t.co/Wi5u5aYQXn
ADP Beats Slightly, Minor Revision; Treasuries Unmoved
ADP with a slight beat along with small negative revision to previous month. Nothingburger. USTs yawn
Belly Bonds Sell Off; 5-Year Yields Ease
Non-stop selling of the belly since futures opened last night with 5s easing up on the curve after a historic run. https://t.co/7GuCuTfHeW
Crude Jumps 8% As
Not a terribly surprising open. Crude up 8%. SPooz off 1% and USTs up solidly bid but selling into best levels.
Aussie 10s
Aussie 10s have on average traded 67bps cheap to UST 10s over the past few weeks. Currently trading 4.58 which suggest UST 10s should open around 3.91, 3 bps richer (that's like 6-7 ticks)
Fast 7-Year Auction Turn; Feb Extension Increases Friday
It will be a quick turn from today's 7y auction to month end tomorrow. Reminder Feb duration extension will be larger Friday as it always is in a refunding month.
Rich 5s Cheapen Ahead of Auction; Yields Rise
Not surprising to see some cheapening of very rich 5s before the auction later today. 2s5s10s up a few bps from Monday's Citrini low. Interesting to see if the move has legs post-auction https://t.co/ZQjjNm6NwT
2‑Year Auctions Shine During Nasty Treasury Roll Week
2y auctions during roll week are usually more interesting esp when TU (ZT) roll is this nasty
5‑Year Treasuries Poised to Benefit From AI Disruption
5-year UST becoming the primary beneficiary of AI-driven disruption. Market pricing a 'lower for longer' rate environment, richening the belly. 2s5s10s 'fly https://t.co/7Rs11vfQp5
Waller's March Cut Unlikely; FOMC Odds Near Zero
March cut may be a coin flip for Waller based on Feb payrolls, but it's not for the FOMC. Cut odds close to zero
Fade the Belly Below -90; Auctions May Reverse
Both short and long term, this is a good level to fade the belly with the curve-wide 'fly (2s5s30s) back below -90. Mid-curve auctions next week could trigger a reversal https://t.co/q33LIbWZ5V
Yield Curve Ste
USTs for now reacting to the loss of tariff revenue, but it remains to be seen how this plays out. Curve steepening https://t.co/ZMjLP2vbxi
30‑Year TIPS Auction Pressures Long‑End Breakevens
Long-end breakevens have been under pressure with a brand new 30y TIPS ($9B) up for auction later today. This will be it for the long end though. Rest of the month is front (2s) and belly (5s &...
March 2Y Futures Expected Heavy Amid Nasty Roll
Great reminder futures rolls (H25 to M26) are upon us. Bottomline March 2y futs should be heavy. Roll is nasty at -4.5 which should add to the flattening pressure along with front-end auctions next week.
Upcoming UST Auctions May Cool Rally, Create Opportunity
Busy UST auction schedule in the next eight days could finally slowdown the rally a bit and offer an opportunity. Brand new 20s ($16B) today, new 30y TIPS tomorrow ($9B), and regular size/schedule 2s, 5s and 7s next week.