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Treasury To Cut Auction Sizes More Than Expected

Treasury To Cut Auction Sizes More Than Expected

The US Treasury said on Wednesday, just hours before the Fed unveils its balance sheet-busting…

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Treasury To Cut Auction Sizes More Than Expected

The US Treasury said on Wednesday, just hours before the Fed unveils its balance sheet-busting Quantitative Tightening, that it trimmed its quarterly sale of longer-term debt for a third straight quarter (with the largest cuts coming in the seven-year and 20-year maturities) and also warned that it may make further reductions, citing “strong” federal tax revenues.

The Treasury said it was trimming issuance by smaller increments than in previous quarters based on projected funding needs that include strong tax receipts and potential redemptions of Treasury securities as par tof the Fed's QT.

Specifically, the Treasury announces refunding debt sales next week totaling $103BN, down $7BN from $110BN in February,  to refund approximately $47.8 billion of privately-held Treasury notes maturing on May 15, 2022 and plans to reduce sizes for all fixed-rate nominal auctions during the quarter. This marks the longest string of quarterly cuts since a 2014-2015 cycle. In a surprise for some dealers, it’s also trimming sales of two-year, three-year and five-year auctions in coming months (see below). The refunding issuance will raise new cash of approximately $55.2 billion; the details are as follows:

  • Treasury to sell $45b of 3-year notes on May 10, down $5BN from the Feb refunding
  • Treasury to sell $36b of 10-year notes on May 11, down $1BN from the Feb refunding
  • Treasury to sell $22b of 30-year bonds on May 12, the same amount as the Feb refunding.

Next week's $103BN refunding is the smallest since May 2020, and compares with a peak of $126BN first reached in February 2021; auction sizes across the curve began rising in 2018 to finance tax cuts and surged in 2020 to finance federal pandemic response

Over the next three months, the Treasury anticipates incrementally reducing the size of each of the 2-, 3-, and 5-year note auctions by $1 billion per month.  As a result, the size of the 2-, 3-, and 5-year note auctions will each decrease by $3 billion by the end of July.  Treasury also anticipates reducing the size of the 7-year note auction by $2 billion per month.  As a result, the size of the 7-year note auction will decrease by $6 billion by the end of July. Treasury also anticipates decreases of $1 billion to both the new and reopened 10-year note auction sizes and to the new and reopened 30-year bond auction sizes starting in May.  Treasury also anticipates decreases of $2 billion to both the new and reopened 20-year bond auction sizes starting in May. For the 20-year bond, Treasury announced sizes of $17b/$14b/$14b for new issue and reopenings; dealer estimates ranged from unchanged ($19b/$16b/$16b) to as low as $15b/$12b/$12b over May, June and July. In addition, Treasury anticipates maintaining the May and June reopening 2-year FRN auction sizes and maintaining the July new issue 2-year FRN auction size.

Or visually:

Separately, changes in nominal and FRN auction sizes will reduce issuance to private investors by $69b compared to the previous quarter. TIPS auctions during the quarter will include a $14b 10-year reopening in May, an $18b 5-year reopening in June and a $17b 10-year new issue in July. The June 5-year TIPS reopening and the July 10-year TIPS new issue will each increase by $1BN.

“Given Treasury’s desire to stabilize the share of TIPS as a percent of total marketable debt outstanding and continued robust demand, Treasury will continue to monitor TIPS market conditions and consider whether subsequent modest increases would be appropriate,” Treasury says.

The Treasury said on Monday it expects to pay down $26 billion in debt the second quarter, down from a January borrowing estimate of $66 billion, primarily because of an increase in receipts. The second-quarter estimate assumes an end-of-June cash balance of $800 billion.

As Bloomberg notes, dealers had widely expected the reduction to next week’s sale of notes and bonds, but viewed it as likely to be the last cutback ahead of the Federal Reserve’s move to shrink its $5.8 trillion stockpile of Treasuries. The Fed is forecast to unveil its bond-portfolio runoff plan later on Wednesday, and that process was seen forcing the Treasury to have to sell more debt to the public.

The U.S. government had increased auction sizes in 2020 to pay for coronavirus-related spending; however, since November 2021, Treasury has made substantial progress towards aligning issuance with intermediate-term borrowing needs by reducing auction sizes across all nominal coupon securities. During this period, it said it "also received important information regarding Treasury’s projected borrowing needs, most notably recent strong tax receipts and public communications from the Federal Open Market Committee regarding potential redemptions of Treasury securities from the Federal Reserve System Open Market Account (SOMA)." 

Based on this updated information, "Treasury intends to continue reducing auction sizes of nominal coupon securities during the upcoming May – July 2022 quarter, though by smaller increments than in previous quarters.  While the issuance plans announced today leave Treasury well positioned to finance additional privately-held net marketable borrowing needs resulting from potential SOMA redemptions and to address potential changes to the fiscal outlook, additional reductions in future quarters may be necessary depending on future developments in projected borrowing needs", the Treasury said, referring to the Fed's intention to stop rolling over all of the maturing Treasury securities in its System Open Market Account

Treasury plans to address any seasonal or unexpected variations in borrowing needs over the next quarter through changes in regular bill auction sizes and/or CMBs.

There was another surprise announcement: regarding bills, the Treasury said it plans to change the 4-month cash management bill into a weekly benchmark offering, with details to be provided at the August refunding announcement. Some more details:

Given the outlook for T-bill supply over the intermediate to long term and after gathering feedback from a variety of market participants, including the primary dealers and the Treasury Borrowing Advisory Committee, later this year Treasury intends to change the 4-month (i.e., 17-week) CMB into a benchmark bill (part of the regular weekly bill issuance schedule going forward).  Investor reception to the 4-month CMB has been strong, and elevation to benchmark status will further support demand.

Over the coming months, Treasury plans to make necessary operational and systems changes in order to smoothly transition the 4-month CMB to benchmark status.  During this transition, Treasury will continue to issue the 4-month CMB at a regular cadence.  Treasury also intends to maintain the Tuesday settlement and maturity cycle when the 4-month CMB becomes a benchmark bill.  Additional implementation details, including the likely timing of the first benchmark auction, will be provided at the August quarterly refunding.

Looking ahead, the Treasury made two preview announcement: i) it intends to issue in the coming months a request for information about possible steps to improve transparency for secondary market transactions in its securities and encourages market participants and the broader public to respond; and ii) the Treasury is planning amendments to auction regulations in coming months, including an increase in the non- competitive bidding and award limits for all securities to $10MM from $5MM in light of growth in auction sizes.

Separately, the minutes of the all-important Treasury Borrowing Advisory Committee (TBAC) latest meeting indicated the following:

  • In light of the strength in federal tax receipts, as well as the prospect for Federal Reserve balance sheet reductions, the Committee recommended that Treasury should continue with coupon auction size reductions across tenors during the upcoming refunding quarter, with slightly larger reductions in the 7-year note and 20-year bond, but at a slower pace than cuts announced in November and February
  • They noted reductions to nominal coupon issuance would likely maintain the share of bills within, but toward the lower end of, its recommended 15%-20% range over time
  • Committee emphasized the need for Treasury to remain nimble in its debt management decisions, given the ongoing uncertainty in borrowing needs
  • Also said the strength in receipts should be monitored to determine if it is “more of an anomaly or a trend that could warrant additional cut to coupons in the subsequent quarters”
  • Committee heard a presentation on Treasury market trading conditions since the beginning of the year and how evolving inflation and monetary policy expectations, as well as heightened geopolitical tensions affected market volatility and liquidity
  • Presenting member stated that while liquidity conditions since the beginning of the year appeared worse based on some metrics, other metrics showed no significant deterioration, and funding markets were functioning properly and weren’t a factor in strained liquidity conditions
  • Lower liquidity was largely due to elevated volatility as a result of the elevated uncertainty around the inflation, monetary policy, and geopolitical outlook
  • Committee then discussed the presentation, with several members noting that liquidity conditions could also be affected by the Federal Reserve’s balance sheet reduction
  • TBAC then turned to a presentation on the four-month, or 17-week cash management bill (CMB)
  • Presenting member noted that Treasury should take into account the trajectory of future bill issuance, current and future demand for the 4-month CMB compared to benchmark bills, and whether this benchmark offering would complement the current debt management process
  • Based on the projected growth in bill issuance in the longer term, strong expected future demand, and the compatibility of the 4-month bill issuance patterns and maturities for both investors and Treasury, the presenting member recommended that Treasury should consider moving the 4-month CMB to benchmark status
  • The Committee unanimously supported the recommendation to make the 4-month bill a benchmark tenor

In response to the Refunding announcement, Treasuries did, well... nothing, holding on to gains across belly and long-end of the curve. 

The 5s30s curve was around -2.2bp, remaining flatter by 0.7bp on the day, while 2s10s spread extends flattening slightly to 3bp tighter on the day. U.S. yields remain ~1bp richer across long-end of the curve with front-end underperforming, with 2- year yields cheaper by ~3bp on the day. In the long-end the 10s20s30s fly is steady around 45bp, little changed on the day after the refunding announcement.

Tyler Durden Wed, 05/04/2022 - 09:20

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Government

Royal Caribbean Shares Huge News on Covid Testing, Vaccine Rules

President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise…

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President Michael Bayley gave some straight answers on pre-cruise covid testing and potentially dropping vaccine requirement at a Q&A during the cruise line's President's Cruise.

Being on a cruise has largely returned to the same experience it was before the pandemic. Mask requirements have been dropped, capacities have returned to normal, and social distancing requirements have been dropped.

In fact, aside from crew members still having to wear masks and some stray passengers opting to do so in certain indoor situations, there's really no sign of covid rules once you board your cruise.

Before you board, however, the pandemic still has an effect on cruising. Every passenger 12 and older must be vaccinated (and must prove so before getting on board) and all passengers must produce a negative covid test taken no more than two days before getting on the ship.

And, while covid remains a problem, the cruise industry sees some light at the end of the tunnel when it comes to pre-cruise protocols. Executives from the major cruise lines -- Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Line (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report -- have said very little about plans to drop pre-cruise testing and vaccination requirements,

Now, however, Royal Caribbean President Michael Bayley has spoken out on both issues and has given cruise fans some real answers.

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When Will Covid Tests and Vaccinations Get Dropped?

The major cruise lines have largely stayed quiet about covid protocols because they remain somewhat beholden to the Centers for Disease Control (CDC). The current CDC rules are voluntary, but voluntary is sort of a relative term when it comes to the power the federal agency has over the cruise industry.

It makes sense that the industry has been cautious in commenting on when covid protocols may change, but with the end at least seeming feasible Bayley answered questions about both the end of pre-cruise testing and potentially dropping vaccination requirements during the 2022 Royal Caribbean President's Cruise on Ovation of the Seas, the Royal Caribbean Blog reported.

"I think pre-cruise testing is going to be around for another couple of months," Bayley said. "We obviously want it to go back to normal, but we're incredibly cognizant of our responsibilities to keep our crew, the communities and our guests safe."

Bayley was less hopeful about the end of vaccinations, according to the blog, which has no connection to Royal Caribbean.

"The no vaccine question is is a huge question that none of us know the answer to," he said. "I'm skeptical that's going to change in the in the real short term. Many and most of the destinations that we visit require a high degree of vaccination, and they expect our crew to be vaccinated."

Cruise Lines Covid Protocols Are Working

Covid has not gone anywhere, but the cruise industry has been very successful at controlling the impact of the virus. Bayley noted that the CDC shares some information with him about the "millions" of people who have sailed from U.S. ports over the past 12 months.

"And the number of people who died from COVID who'd sailed on ships over the past year was two," the Royal Caribbean Blog reported. "Two is terrible. But against the context of everything we've seen, that's it's truly been a remarkable success."

Vaccine requirements remain a touchy issue as some people have chosen not to be vaccinated and that means they cannot cruise. That seems unlikely to change anytime soon given the destinations Royal Caribbean visits and the CDC information which shows that the current protocols are working.

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China Stocks Outperform On Unexpected COVID Shift

China Stocks Outperform On Unexpected COVID Shift

Update (0920ET): China’s move to ease quarantine rules for inbound travelers from three…

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China Stocks Outperform On Unexpected COVID Shift

Update (0920ET): China's move to ease quarantine rules for inbound travelers from three weeks to just one week has bolstered sentiment for Chinese equities. 

Bullish calls are rising on Chinese stocks as the CSI 300 Index inches near a bull market. 

Fred Hu, the founder of China-based investment firm Primavera Capital Group, told Bloomberg that he believes Chinese tech firms have turned the corner after a $2 trillion rout sparked by Beijing's yearslong technology crackdown. 

NASDAQ Golden Dragon China Index plunged more than 76% since its peak in early 2021, coinciding with Beijing's crackdown start. The index hit a low in March and has since bounced 67% -- because the crackdown fears show signs of softening. 

Hu believes "this could be the beginning of a new era for China tech ... There's a lot of value to be discovered," adding that investors still need to be selective in picking stocks. 

Adding to support is the People's Bank of China's accommodative monetary policy, which is the opposite of global central banks that aggressively tighten interest rates to prevent the surge in inflation from turning into dreaded 1970s-style stagflation. Today's quarantine reduction news, tech crackdown abating, and PBOC easing have produced a more optimistic outlook for Chinese stocks. 

However, a lingering threat of a US slowdown could be problematic for all investors. 

Lorraine Tan, director of equity research at Morningstar, told Bloomberg TV: "Even if we do get some China recovery in 2023, which could be a buffer for this region, it's not going to offset the US or global recession."

* * *

China unexpectedly slashed quarantine times for international travelers, to just one week, which suggests Beijing is easing COVID zero policies. The nationwide relaxation of pandemic restrictions led investors to buy Chinese stocks.

Inbound travelers will only quarantine for ten days, down from three weeks, which shows local authorities are easing draconian curbs on travel and economic activity as they worry about slumping economic growth sparked by restrictive COVID zero policies earlier this year that locked down Beijing and Shanghai for months (Shanghai finally lifted its lockdown measures on May 31). 

"This relaxation sends the signal that the economy comes first ... It is a sign of importance of the economy at this point," Li Changmin, Managing Director at Snowball Wealth in Guangzhou, told Bloomberg

At the peak of the COVID outbreak, many residents in China's largest city, Shanghai, were quarantined in their homes for two months, while international travelers were under "hard quarantines" for three weeks. The strict curbs appear to have suppressed the outbreak, but the tradeoff came at the cost of faltering economic growth. 

The announcement of the shorter quarantine period suggests a potentially more optimistic outlook for the Chinese economy. Bullish price action lifted CSI 300 Index by 1%, led by tourism-related stocks (LVMH shares rose as much as 2.5%, Richemont +3.1%, Kering +3%, Moncler +3%). 

"The reduction of travel restrictions will be positive for the luxury sector, and may boost consumer sentiment and confidence following months of lockdowns in China's biggest cities," Barclays analysts Carole Madjo wrote in a note. 

CSI 300 is up 19% from April's low, nearing bull market territory. 

Jane Foley, a strategist at Rabobank in London, commented that "this news suggests that perhaps the authorities will not be as stringent with Covid controls as has been expected." 

"The news also coincides with reports that the PBOC is pledging to keep monetary policy supportive," Foley pointed out, referring to Governor Yi Gang's latest comment. 

She said, "this suggests a potentially more optimistic outlook for the Chinese economy, which is good news generally for commodity exporters such as Australia and all of China's trading partners." 

Even though the move is the right step in the right direction, Joerg Wuttke, head of the European Chamber of Commerce in China, said, "the country cannot open its borders completely due to relatively low vaccination rates ... This, in conjunction with a slow introduction of mRNA vaccines, means that China may have to maintain a restricted immigration policy beyond the summer of 2023." 

Alvin Tan, head of Asia currency strategy in Singapore for RBC Markets, also said shortening quarantine time for inbound visitors shouldn't be a gamechanger, and "there's nothing to say that it won't be raised tomorrow." 

Tyler Durden Tue, 06/28/2022 - 09:20

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Spread & Containment

Penny Stocks To Watch: Why TOUR, JAN, ENDP, BRDS & WEJO Stock Are Moving

Penny stocks to watch with news
The post Penny Stocks To Watch: Why TOUR, JAN, ENDP, BRDS & WEJO Stock Are Moving appeared first on Penny Stocks to…

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Penny stocks are well-known for their high-risk and high-reward potential. When it comes to a choppy stock market, traders will flock to some of these names for quick gains instead of taking a chance at investing in a broader market that still has some downside left.

Needless to say, this week, in particular, could bring more speculation and uncertainty thanks to key economic data. The foremost is second-quarter GDP results set to report on Wednesday. The biggest question is, will GDP data signal signs or even confirm a recession?

According to the Bureau of Economic Analysis, the figures show some interesting trends:

“Real gross domestic product (GDP) decreased at an annual rate of 1.5 percent in the first quarter of 2022, following an increase of 6.9 percent in the fourth quarter of 2021. The decrease was revised down 0.1 percentage point from the “advance” estimate released in April. In the first quarter, there was a resurgence of COVID-19 cases from the Omicron variant and decreases in government pandemic assistance payments.”

But whether or not this read-out is bullish or bearish may not matter much to traders looking for penny stocks to buy. Let’s explain.

Penny Stocks To Watch

In general, broader market trends take a back seat to whatever individual catalysts are at play with penny stocks. If you’ve traded long enough, I’m sure you’ve seen the stock market crash lower, yet several penny stocks are exploding higher. This detached trend is unique and has become one of many reasons traders hunt for top trending penny stocks daily.

One of the most prominent reasons for cheap stocks to move iradically even with the stock market down tends to involve headlines. These can become significant catalysts for a bullish (or bearish) trend. Here’s a quick list of penny stocks with news that are moving during the week.

  • Wejo Group Limited (NASDAQ: WEJO)
  • Bird Global Inc. (NYSE: BRDS)
  • Tuniu Corp. (NASDAQ: TOUR)
  • JanOne Inc. (NASDAQ: JAN)
  • Endo International (NASDAQ: ENDP)

Best Penny Stocks To Buy Now

Are penny stocks with news the best to buy now? Much of that answer deals with specific trading styles. Sometimes, news catalysts can be short-lived, primarily suitable for day traders. In other instances, headlines include verbiage and further discussion that prompt a longer-term forecast for some. If a company posts news, diving deeper beyond the headline is a good idea.

Wejo Group Limited (NASDAQ: WEJO)

Who said penny stocks have no legitimate business with well-established companies? Wejo Group is a prime example of why that statement isn’t accurate. The smart-mobility could solutions company focuses on electric and autonomous vehicle data. This has become a point of interest for those looking at car companies aiming for self-driving and a more tech-focused model.

Why WEJO Stock Is Moving

This week, Wejo Group announced a collaboration with none other than Ford Motor Company (NYSE: F) in Europe. The two will leverage data and insights where Wejo can access personalized connected vehicle data from Ford vehicles.

“Providing actionable data insights to insurance providers is another example of how Wejo is expanding into additional markets and demonstrating new use cases for OEMs and insurance companies to monetize connected vehicle data for good,” said Richard Barlow, founder, and CEO, of Wejo.

Bird Global Inc. (NYSE: BRDS)

Another mobility company on the list of penny stocks to watch is one you might have seen “scooting” around your city. Bird Global offers eScooters and eBikes that anyone can rent using a Bird-connected app. Billing itself as a “micro electric vehicle company,” Bird’s suite of scooters and bikes is becoming popular among riders looking for urban travel without getting in an actual vehicle. Unfortunately, BRDS stock wasn’t such a high flyer after its IPO debut last year. Shares have gone from highs of $11.25 to lows of $0.4648 in a matter of 7 months.

Why BRDS Stock Is Moving

Earlier this month, Bird received a notice of non-compliance with the NYSE based on its low share price. The exchange requires companies to maintain a closing price of at least $1 for 30 consecutive trading days to keep the listing. Considering that the company plans to notify the NYSE by July 5th of its intention to “cure” the stock price deficiency, there could be some speculation building as the countdown begins.

Tuniu Corp. (NASDAQ: TOUR)

Travel is one of the industries taking a back seat over the last few years. Thanks to the rise of the pandemic and continued COVID restrictions, travel stocks haven’t faired as well as their market cohorts. However, the area of the industry that has remained beaten down involves companies with exposure to China’s market.

Tuniu Corp. is a prime example of the bearish sentiment for Chinese travel stocks. TOUR stock has slumped from over $2 to under $0.50 within the last year. The company offers an online leisure travel service focused on prepackaged and self-guided tours. This week, TOUR stock’s tides changed a bit, and shares have begun to rally.

[Read More] What to Know About Buying Penny Stocks on June 28th

Why TOUR Stock Is Moving

There isn’t any TOUR stock-specific news. However, broader industry information has come to light and acted as a catalyst. In particular, China has begun loosening its COVID quarantine rules. As a result, bullish sentiment has returned to the sector, prompting momentum in several travel names, including Tuniu.

JanOne Inc. (NASDAQ: JAN)

JanOne develops drugs with non-addictive and pain-relieving properties. One of its focuses is on curbing the opioid crisis. Its JAN101 platform is being developed for treating peripheral artery disease and is a catalyst behind the latest move in JAN stock today.

Why JAN Stock Is Moving

This week, JanOne announced that work was completed with Dr. Maureen Donovan at the University of Iowa. It will allow for an improved formulation of JAN101, which has been used successfully in trials for reducing pain and improving nerve function. Furthermore, JanOne expects to start manufacturing and validating processes “in the near future.”

One of the other attractive points of interest for traders is JAN stock’s float. Looking at multiple outlets, you’ll see that this figure is well below 10 million shares. In cases of low float penny stocks, volatility can play a leading role. Given the latest headline, this could be something to keep in mind heading into the rest of the week.

Endo International (NASDAQ: ENDP)

Shares of Endo International took flight this week. The specialty pharmaceutical company recently focused on developing an orthopedic product for treating osteoarthritis knee pain. It signed a deal with Taiwan Liposome to commercialize its TLC599 injectable compound, which is in Phase 3 development for osteoarthritis treatment.

[Read more] Penny Stocks To Buy Now? 4 Biotech Stocks To Watch Before July 2022

“TLC599 is fully aligned with our commitment to providing differentiated nonsurgical options to healthcare providers and their appropriate patients,” said Patrick Barry, Executive Vice President, and President, Global Commercial Operations at Endo, in a June 13th update.

Why ENDP Stock Is Moving

You won’t find anything in corporate newsfeeds if you’re looking for why ENDP stock is moving right now. However, if you dig deeper into the company’s filings, there may be something evident acting as a catalyst in the stock market today. Millennium Management LLC filed a 13G on June 27th, showing a 1.7% stake in the company. In our article Buy Penny Stocks Like Hedge Funds Do: A How-To Guide, we discussed specific forms and filings to pay attention to if you want to “follow” the money of investment firms.

A 13G pertains to “passive investors” owning less than 20% of a company’s outstanding shares. Once a “passive investor” reaches over 20% of the OS, they must start filing 13D statements.

Best Penny Stocks Today

News can be a way to find names for your penny stocks list. However, when it’s time to buy them, it’s best to dig a little deeper to determine if that news has lasting potential. Penny stocks with news experience volatility early. When it comes to follow-through, much of that comes down to the market itself. Today we looked at 5 penny stocks with news, industry-related speculation, or corporate developments. After seeing why they moved, are any on your watch list right now?

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The post Penny Stocks To Watch: Why TOUR, JAN, ENDP, BRDS & WEJO Stock Are Moving appeared first on Penny Stocks to Buy, Picks, News and Information | PennyStocks.com.

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