Halister News

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(Bloomberg) -- “We expect the global yield rally will impact the US curve in due course,” and “while the Fed can exert pressure on the front-end of the curve up to the 5yr point, they will have a much harder time fighting the disinflationary forces that are keeping long-end yields under pressure,” BMO strategist Aaron Kohli says in note.

• “This furthers our view that the most likely curve outcome from the next few weeks is a flattener, with the long-end leading the way”
• Other observations from strategist morning notes:
• CRT (David Ader): “Demand for Asian and European debt at such depressed rates last night should also remind us just how attractive US yields are vs their overseas alternatives,” and “that dynamic alone should continue to provide a backstop for the US bond market and should put a cap on US yields”
• Marty Mitchell (independent): “We are impressed with just how well the 30yr has held in during the recent correction,” and “to be sure, it continues to benefit from the strong curve flattening flows, from the concern at the Fed on the declining inflation expectations, and from attractive interest rate differentials vs overseas”
• RBS (John Briggs): “It looks like the corrective rally in the markets we have been looking for has begun today, sparked by an incredible move in Japanese bonds following strong auction demand for 30yr JGBs”

(Bloomberg) -- $24b sale at 1pm ET is likely to fare better than last month’s, which was first 3Y to tail since June 2014, because of higher outright yields, recent strength vs OIS and expectations for next Fed hike “still anchored around the end of this year,” Nomura strategists say in unsigned note.

• Negatives for the sale include “return of risk-on sentiment” after recent strong data, and “divergence between credit and equities” that “may induce some asset reallocation”