MAY DAY ... a holiday?   or a (bond-market) plea for help?

Relative Value:
1. TYM1 / TYU1 still somewhat undervalued
2. TYM1 also relatively cheap compared to deliverable securities
3. UST:   (a) 6 to 10 month TEDs very cheap
(b) current 5yr somewhat rich vs Libor
(c) 2yr roll is somewhat undervalued
4. GSE:   (a) 2yr to 3yr Benchmark / Reference Notes likely to
underperform both Libor and other GSE over near term
(b) '05 paper relatively cheap vs Libor and otehr GSE paper
(c) issues under 14 mos trading cheap (funding adjusted)

Comments:
1. Refunding announcement tomorrow: (a) new 5yrs - roll is likely to
open too cheap,  (b) 10yrs - reopening
2. If data from Housing & (recent) auto production are "right" vs
confidence reports ... then FedFunds Futures are probably overvalued
(a) key facets of today's NAPM? ... employment & vendor
deliveries .. if both are stronger...
Previous  Expect
Overall             43.1       44
Employment     40.4
Vendor         48.3
(b) auto & light truck sales: previous was 14.2 combined, should
be roughly unch


WDC

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