USTs continued to slide, bear-steepening on a low volume Monday. 10yr and 30yr yields recent highs at 4.545% & 4.66% respectively. 2s10s steepened above -60bps for the first time since May. Positioning, technicals, supply, negative convexity hedging by CTA’s and the recent oil rally, were all cited as culprits for the move. USTs getting smacked again this morning, trading through the NYC lows with 10yr at 94-19, yielding 4.56% , which is back to 2007 territory.
The US dollar continues strong, with the dollar index BBDXY hitting year to date highs, above 1264. USDJPY is approaching 149.00 where some anticipate BoJ intervention
Fed Goolsbee was waxing somewhat lyrical, “I’ve been calling that the golden path and I think it’s possible, but there are a lot of risks and the path is long and winding”; "The risk of inflation staying higher than where we want it is the bigger risk.”
A miss on Dallas Fed manufacturing, down 0.9pts in September to -18.1, consensus looked for a rise. Regional surveys have been mixed so far in September.
In Europe German IFO, was slightly better than expected, down 0.1pts to 85.7 in September. Mdm Lagarde envisages that rates will remain restrictive "for as long as necessary" adding "it's a long race that we are in". ECB Villeroy contributed “There is a risk of "easing too early". ECB's focus should be on "persistence, not pushing rates up"; ECB "must monitor oil price impact on wages, expectations". DB notes that European household inflation expectations has been drifting higher in recent months.
Asia primary issuance continues at a dribble with Korea Land & Housing pricing a $700mm 3yr social bond at T+75 (KOLAHO 5 ¾ 10/06/25). Outright buying has pushed the spread to +70, and dragged the sector tighter. Now that the bond investor world includes Australasia as an Asian jurisdiction we can lay claim to yesterdays US$1.65bn two tranche deal for ANZ. $1bn ANZ 5.671 10/03/25 was priced at T+55, ANZ Float 10/03/25 came at overnight SOFR +64bps. Toyota Motor Finance chose to denominate TOYOTA 4 04/02/27 in Euro, pricing at mid-swaps +52bps.
In China the PBOC injected CNY 202 bn into the banking system via 14-day reverse repo at an unchanged rate of 1.95%. This injection was substantial increase from the previous sessions CNY 82bn, an effort to maintain adequate liquidity.
This morning spreads are a couple tighter but trading is on the light side of light. Huarong Finance (HRINTH) are .125-.375pt lower across after Moody’s placed Baa3 long-term and P-3 short-term issuer ratings of China Huarong Asset Management under review for downgrade. but the drop is more attributable to the sell-off in rates. Moody’s sees company’s 1H net loss as a reflection of its weakness in risk management, which is a “key driver” of the rating action
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