10s Probe 4%

Cash Tsys sit 1.0-3.5bp cheaper into London hours, with 7s leading the weakness. TYZ2 sits 0-06+ off the base of its 0-15+ range, with volume nearing 130K.

• 10-Year yields briefly showed above 4.00% for the first time since ’10 overnight, before pulling back as bears failed to force a sustained and meaningful move through the round number.
• We have flagged the 4.00% mark and double top zone drawn off the ‘09/’10 highs (just above the round number) as a key technical area in recent days.
• San Francisco Fed President Daly reiterated the central Fed message re: its resolute approach to taming inflation.
• Elsewhere, White House economic advisor Deese played down the idea of a Plaza-type accord in the FX markets, allowing the broad USD to firm. Meanwhile, Axios suggested that Tsy Secretary Yellen may depart the Biden admin after the mid-terms. These matters may have factored into the cheapening in Tsys.
• We saw a block seller of TY futures (-~3K) which helped the cheapening. There were also block sales of FVX2 106.50 puts (-2.5K) & FVX2 106.75 puts (-2.5K), with the former seemingly partial profit taking and the latter perhaps part of a spread against the remainder of the existing exposure.
• Gilt market moves will continue to be eyed (in light of yesterday’s IMF and ratings agency rhetoric re: UK fiscal matters), with second tier data, 7-Year Tsy supply and Fedspeak from Powell, Bowman, Bullard, Bostic, Evans & Barkin due in NY hours.