Market 04/09: Auction of $58 billion 3Y bond fails - demand drops sharply

Auction of up to $58 billion 3-year Treasury bonds fails

Today's 3Y Treasury bond auction session completely fails:

Demand from foreign investors decreases replaced by dealers. High tail and yields much higher than previous session:

• High Yield: 4.548% (market yield before auction: 4.528% | Previous High Yield: 4.256%).

  => High tails: 2bps (vs previous: stopthrough 1.3bps)

  • Allocation at High Yield: 34.81% (previous 30.57%)

• Bid-To-Cover ratio: 2.5 (previous 2.6)

• Auction components (competitive results):

  • 60.26% of successful bid value from foreign investors (previous: 70.05%)

  • 19.31% from Dealers (previous: 14.4%)

Demand for 3Y bond has decreased markedly. While today's 3Y bond issuance amount is high near record

Update March CPI forecasts from investment banks

• Goldman Sachs: expects core CPI +0.27% M/M in March

• BofA forecast: core CPI +0.24% M/M | headline CPI +0.25% M/M

• Forecasts for headline CPI Y/Y from some financial institutions:

  • Morgan Stanley: +3.4%

  • Bank of America: +3.3%

  • Wells Fargo: +3.5%

  • Citibank: +3.4%

  • Nomura: +3.4%

  • Barclays: +3.4%

  • Deutsch Bank: +3.4%

  • UBS: + 3.4%

  => Market average forecast: ~ +3.4% y/y higher than February (+3.2% y/y)

• Cleveland Fed forecast: headline CPI +3.41% | core CPI +3.73% y/y.

  

CPI to be released tomorrow will help clarify monetary policy outlook.

NFIB small business sentiment survey March: business confidence hits lowest since 2012

Small business sentiment index drops to just 88.5 (previous month: 89.4 | estimate 89.9)

• Business confidence (blue line) drops to lowest since late 2012

  • Hiring intentions decrease + Sales expectations weaken

• Inflation continues to be the top concern for small businesses

Gold fever continues to surge as confidence in any fiat currency declines due to public debt and inflation

• Wells Fargo expects Costco's gold sales revenue to reach 100 million to 200 million USD per month

• Gold continues to rise to 2346.13 USD/ounce as the market expects CPI to rise higher than the previous month and the Fed to cut interest rates late this year.

World central banks have increased gold holdings for 9 consecutive months.

• PBOC has increased gold holdings for 17 consecutive months.

• In February alone, central banks bought a net +19 tons of gold.

  • From the beginning of the year to now, their net gold purchases have reached +64.5 tons.

3 key issues in the US Treasury Secretary's visit to China

1. Concerns about overproduction

• China's massive production capacity is too large for the world to consume:

  • Subsidized exports of electric vehicles, solar panels, and batteries from China are surging, threatening US jobs and businesses.

2. No support for Russia

• Chinese companies could face "serious consequences" if they provide material support for Russia's war in Ukraine

China's response:

• Other countries should not interfere with China's normal bilateral relations and the national or business interests of its companies.

3. US-China need to continue dialogue

• US priorities are to protect the national security of the US and its allies, and to promote healthy economic relations

• Cooperate with China in areas where both countries can and should cooperate.

Crypto market:

• US Treasury requests additional powers to counter foreign crypto exchanges, as part of goals to protect national technology security.

Other news

1. Blackberry partners with AMD to launch improved robot manufacturing solutions in industry and healthcare.

2. Google announces a series of updates to its AI services, emphasizing that this technology is safe and ready for business use

3. Boeing aircraft deliveries in Q1/2024 drop to the lowest level since mid-2021 after the fuselage blowout crisis.

   • The company delivered 83 aircraft in Q1, a sharp drop from 157 in the previous quarter

   • In March alone, Boeing delivered only 29 aircraft.

4. Palo Alto Networks and Google Cloud expand partnership to improve cybersecurity for AI

5. Intel announces new version of AI chip at Vision event, threatening Nvidia's monopoly in AI chips