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Bonds, Stocks Bounce Ahead CPI

US TSYS SUMMARY
No data on amid relative sedate trade in rates -- holding to narrow/higher band after making most of the rally in early overnight trade. CPI and $38B 10Y auction R/O Wed. Positive correlation (the new negative) between equities and Treasury futures continues: strong Treasury futures more than made up for Monday's weak finish, as are equities after the bell: S&Ps +76.5, NASDAQ over 530.0 higher, Dow Industrials +215.0.
  • Yield curves bull flattening, large late overnight flattener block contributing to move: -30,085 FVM 123-22.5, sell through 123-23.75 post time bid (dv01 $1.583M) vs. +18,650 TYM 132-10.5, buy through 132-08 post time offer (dv01 $1.657M)
  • Midmorning 5s and 10s Block: 11,900 FVM 123-25.25 ($650k dv01) through the 123-24.5 post-time offer; 6,227 TYM 132-11 ($530k dvo1) through the 132-10 post-time offer. Desks still debating if double buy or a continuation of large flattener Block overnight -- leaning toward the latter.
  • While implieds did not weaken significantly, option accts took advantage of rally in underlying to buy more puts at cheaper premium.
  • Tsys gained after US Tsy $58B 3Y Note auction (91282CBR1) drew 0.355% high yield (0.196% last month) vs. 0.357% WI, 2.69 bid/cover vs. 2.39 previous -- sigh of relief after the 7Y auction tailed 4bp two weeks ago.
  • The 2-Yr yield is up 0.2bps at 0.1647%, 5-Yr is down 3.4bps at 0.8197%, 10-Yr is down 4.7bps at 1.5437%, and 30-Yr is down 5.6bps at 2.26%.
BulletMarketsFixed Income Bullets
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