Market 04/24: Tech ER shoulders the market before $70B T-bond auction session

Record $70B 5Y Treasury auction tentatively stable

Details of today's auction results:

• High Yield: 4.659% (market yield: 4.655% | previous session: 4.235%)

  => Mild tail: 0.4 bps

  • Successful bid ratio at High Yield: 1.93% (previous session: 81.56%)

• Bid-to-cover: 2.39 (down from previous session: 2.41)

• Allocation ratio: foreign demand down vs domestic, dealers up

  • Dealers (dealer): 15.02% (higher than previous session: 12.73%)

  • Foreign bidders: 65.74% (lower than previous session: 70.45%)

This is not a very promising auction due to the mild tail, accompanied by signs of reduced demand (bid-to-cover down while dealer bids up) for this favored 5Y intermediate bond.

Before the auction, 5Y T-bond market yield had risen due to concerns over whether the market could absorb the massive Treasury bond supply.

March durable goods orders drop the most since Covid period

March durable goods orders increase +2.6% M/M, but -2.2% Y/Y — largest drop YoY since Covid lockdown period.

• Ex-transport orders +0.2% M/M, in line with estimates and higher than previous month +0.1% M/M

Meanwhile, February data continues to be revised down — 8th time durable goods orders revised down in the past year

Capital goods orders ex-aircraft only +0.2% M/M, lower than previous +0.4% M/M => companies investing less in production facilities

• Non-defense transportation ex-aviation +0.2% M/M, up from -0.6% previous month

• Computer and Related Products orders -3.9% M/M - largest drop since COVID lockdown

Crude oil inventories rise higher than expected

Crude oil report update:

1. API

• Crude oil -3.23 million barrels (expected +500k)

• Cushing -898k

• Gasoline -595k (expected -1.5 million barrels)

• Distillates +724k (expected -1.0 million barrels)

2. DOE

• Crude oil -6.4 million barrels (expected +500k)

• Cushing -658k

• Gasoline -634k (expected -1.5 million barrels)

• Distillates +1.6 million barrels (expected -1.0 million barrels)

Government added 793,000 barrels to SPR last week - largest addition since January

US crude oil production unchanged at 13.1 million bpd (near record high) but rig count growth slowing

Crypto Market: Hong Kong approves Bitcoin and Ether spot ETF for listing from 04/03

Hong Kong is the first Asian stock exchange to approve Bitcoin and Ether spot ETF for listing from 04/30

• Differences of bitcoin and ETH spot ETFs on Hong Kong exchange compared to US:

  Hong Kong funds allow creation and redemption in kind.

  • Allow exchange of underlying assets for ETF units and vice versa, contrary to the cash creation model used by US funds.

US prosecutors propose 3-year prison sentence for Binance founder CZ.

SEC demands Terraform Labs and Do Kwon pay $5.3 billion fine

Earnings reports: Tesla, Visa, Boeing, AT&T, Texas Instruments

1. Tesla

• Deliveries -9% Y/Y to 386,000 vehicles

• Revenue -9% Y/Y to 21.3 billion USD (below expectations by 1.0 billion USD)

• Gross margin 17% (-2pp Y/Y)

• Operating margin 5% (-6pp Y/Y)

• Capex +34% Y/Y to 2.8 billion USD

• Free cash flow -2.5 billion USD

• Non-GAAP EPS 0.45 USD (below expectations 0.05 USD)

Tesla stock up 12% after Elon Musk said the company aims to start production of new affordable EV in early 2025.

2. Visa

• Revenue +10% Y/Y to 8.8 billion USD (above expectations by 0.2 billion)

• Operating margin 61% (-6pp Y/Y)

• Non-GAAP EPS 2.51 USD (above expectations 0.08 USD).

• Payments volume +8% Y/Y

• Processed transactions +11% Y/Y

3. Boeing

• Revenue -8% Y/Y to 16.6 billion USD due to only delivering 737 aircraft

  • Commercial airplanes: revenue -31% Y/Y to 4.7 billion USD

  • Defense, Space & Security: revenue +6% Y/Y to 7 billion USD

  • Global services: revenue +7% Y/Y to 5.0 billion USD

• Non-GAAP EPS: -1.13 USD

4. AT&T

• Revenue: 30 billion USD, -0.4% Y/Y

  • Mobile: service revenue up 3.3% to 16 billion USD.

  • Broadband: revenue +7.7% Y/Y to 2.7 billion USD

  • Postpaid subscribers: +349,000

• Diluted EPS: 0.47 USD

5. Texas Instruments

• Revenue: 3.66 billion USD, down -16% Y/Y

• EPS: 1.2 USD

• Operating profit: 1.29 billion USD, -34% Y/Y

• Q2 revenue guidance: 3.65 - 3.95 billion USD

• Q2 EPS guidance: 1.05 USD to 1.25 USD

Other news

1. US Senate passes bill forcing TikTok to divest or be banned.

   • President Biden says he will sign it into law if Congress passes and sends it to him.

2. President Biden officially signs aid package into law:

   • 60 billion USD to support Ukraine in the war with Russia

   • 26 billion USD for Israel

   • 8 billion USD to ensure security in Taiwan and the Indo-Pacific.

3. Moderna partners with $MSFT OpenAI to advance mRNA with AI

3. UK regulator investigates partnerships between Microsoft, Amazon and smaller AI companies

4. US Chamber of Commerce and business groups file lawsuit to block FTC ruling making non-compete agreements illegal.

5. USD/JPY breaks through 155 and is highly volatile (high volatility).

   • Japanese Ministry of Finance may intervene to prevent further Yen depreciation