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Better Than Exp Retail Sales, Brexit Headlines Drove Vol Friday

US TSYS SUMMARY

Rates traded weaker by the bell but off early session lows to near middle session range amid modest overall volumes (TYZ w/ 825k -- a tepid pace with volumes in the 10Y futures at 290k on the open). Brexit headline and data related risk drove session vol: Retail sales beating expectation while US IP missed the survey. Salient factors spurring trade today:

  • Drug maker Pfizer hopes of vaccine provided mild risk-on tone;
  • UK PM Johnson Brexit comments spurred decent 2-way, rates quickly reversed gains after Australia-style deal intimated
  • Better than expected retail sales weighed on rates (support for equities) Tsys bounced on UK PM spokesman Slack comment:
  • NO POINT IN TRADE TALKS IF EU DOESN'T CHANGE POSITION, Bbg, and "`TRADE TALKS ARE OVER' BECAUSE EU EFFECTIVELY ENDED THEM", Bbg. More Brexit Headline Induced Vol
  • Midday bounce in Tsys w/below exp IP data and recent comments from UK PM spokesman Slack intimating Brexit negotiations are over spurred a quick round of short covering, long end back to narrow overnight range.
  • The 2-Yr yield is up 0.2bps at 0.1411%, 5-Yr is up 0.3bps at 0.3169%, 10-Yr is up 0.8bps at 0.7406%, and 30-Yr is up 1.1bps at 1.5247%.

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