Halister News

(Bloomberg) -- UST 5s30s showing flattening tendencies on charts as steepening momentum abates at 141bps 76.4% Fibo level of Feb-March compression; 5s30s may continue flattening amid any risk-off episode, in contrast to steepening seen in Jan. and Aug., as Fed hikes have now been re-priced further out, Bloomberg strategists Tanvir Sandhu and Sejul Gokal write.

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• Flattening in UST 5s30s accelerating after spread breakdown below 21-DMA and Bloomberg trailing support line at ~136bps
  • Steepening momentum has abated against a confluence zone comprised of the 1st SD line of 50-day range average and 76.4% Fibonacci resistance at ~141bps
    • Flattening support now seen at 130bps, 127bps and 125bps
• U.S. 2s10s has remained relatively flat despite the move higher in breakevens, oil and steepening being a consensus trade since Fed’s dovish March statement
• U.S. OIS curve currently assigning 13% probability of 25bps rate increase in June vs 64% on March 15, day prior to the last FOMC meeting, while Dec. hike probability is 66% vs 100%
• Demand for USTs remains robust as seen in the recent strong 10y and 30y auctions amid global duration demand as core EGBs and JGBs yields continue to compress

• NOTE: Tanvir Sandhu and Sejul Gokal are strategists who write for Bloomberg. The observations they make are their own and are not intended as investment advice.