Treasuries: Their shares crash, hopes are dashed...people forget

With the data flow continuing to point to a resilient economy, and with the Fed's dual mandate no longer in tension, we see risks for front-end yields to reverse higher. As yields have shown increasing sensitivity to the risk assets, we prefer to express this bearish bias through lower-beta bearish trades, which may offer some relative value. However, most curve pairs currently appear too flat after controlling for fundamental drivers. Thus, we are unwilling to turn bearish yet, but should equities find firmer footing, we would look to turn underweight at the front end. Treasury left coupon auction sizes unchanged, as we expected, and removed 「at least」 from its expectation that nominal coupon and FRN sizes will remain unchanged for the next several quarters. This adjustment gives Treasury greater flexibility to raise coupon sizes later in FY27, and suggests increases are not imminent. TBAC judged that increases will likely be appropriate in the second half of FY27, focused primarily i