Halister News

(Bloomberg) -- The 10Y UST yield has probably already reached its 2017 high at 2.6277%, Western Asset Management’s Bonnie Wongtrakool and PGIM’s Greg Peters both said on Bloomberg Television.

• The chances of meaningful fiscal reform in the U.S. have diminished, making higher yields less likely, Wongtrakool said; however, harder to say whether the 10Y yield has reached its low for the year, as there are still a lot of geopolitical risks
• Wongtrakool and Peters, along with Wells Fargo Advisors strategist Brian Rehling, said they see upside risk to upcoming U.S. payrolls report as opposed to downside; Rehling and Peters point to inflation as mattering more than payrolls at this point
• "The jobs report has to be a total disaster for the Fed not to move in June," Rehling said

To contact the reporter on this story: Alexandria Arnold in Seattle at abaca3@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang

(Bloomberg) -- Heavy supply ahead with over EU20b in auctions scheduled (EU23m/bp), partially offset with large redemptions from Italy. Numerous key data points in the U.S., while in Europe focus is on advanced CPI.

• Market holidays in the U.K. and U.S. on May 29 means there will be no GBP, USD Libor fixes; short sterling, gilts, cash Treasuries and U.S., U.K. stocks will be closed. Treasury futures and options will be open but close early
• Key data this week is advanced European CPI reading on May 31; headline is expected to fall as Easter-related price rises drop out of the index and reflecting falls in petrol pump, home heating oil prices, writes RBC in a note
• Heavy week for data in the U.S. with PCE, Personal Spending, Chicago PMI, ahead of employment report on June 2
• Busy week for ECB’s speakers with Nowotny, Draghi (Monday), Liikanen (Tuesday), Coeure, Visco (Wednesday) and Villeroy, Costa (Thursday) all scheduled
• After strong demand in long-dated syndicated sales from Belgium and France, there are still some expectations from Austria and Portugal
• Italy 30y bond has been widely expected, though debt head Cannata said on Tuesday they will be "patient" and allow market to digest what’s already been sold
• Some early month-end flows may emerge toward the end of the week. Bloomberg Barclays’ updated Pan-Euro Aggregate index to extend by 0.08y at the end (vs 0.07y prior)
  • Citi projects the European Govt Bond Index to extend by 0.08y (vs 0.05y avg), and expects 30y France to be major beneficiary of month-end flows, with forecast 0.19y extension for France
• SUPPLY/REDEMPTIONS: Auction supply may total EU20.6b equivalent to around EU23m/bp or 166k bund futures in risk terms
  • May 30: Italy to sell 1.20% 04/2022 for EU2.5-3b and 2.20% 06/2027 EU2.25-2.75b, alongside CCTeu 10/2024 for EU1.25-1.75b
  • June 1: France to sell 1% 05/2027, 5.75% 10/2032, 1.75% 06/2039 for EU7.5-8.5b
  • June 1: Spain to sell new 3y 0.05% 01/2021, 3.45% 07/2066, with SPGBei 11/2030; size to be announce on May 29, Citi estimate EU4b in conventionals, EU0.6b in linkers
  • Redemptions are due from Italy (old 4y) with EU15b due to be repaid on June 1; France will pay EU4b in coupons, Barclays writes in a note
  • U.K. to sell 1.25% 11/2027 for GBP2.5b on June
• NOTE: Auction calendar is ECO20 WE

To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net

(Bloomberg) -- Rates market is at risk of flipping to trading the “policy mistake theme,” BofAML strategists led by Ralf Preusser and Shyam Rajan say in note.

• Real yields and breakevens have declined since mid-March as money market curves have flattened; at same time, odds of a June Fed rate hike have increased
  • At root of repricing of rates market appears to be notion that 2017 may be the last chance for Fed to remove accommodation
• An actual hike might, therefore, “trigger renewed policy- mistake concerns”
  • “The protection offered by betting against the June hike may be somewhat academic”