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Bull Flattening Amongst Large Swings

US TSYS
  • Treasuries have bull flattened on a day of whipsawing following a large ADP miss, the Treasury Refunding announcement and geopolitical swings.
  • ADP was almost 500k below consensus in January and further dampened expectations ahead of payrolls on Fri. Even though the initial reaction was largely unwound, it appeared to set the stage for the subsequent rally after Treasury Refunding that was largely but not completely as expected along with the US announcing the deployment of troops to Eastern Europe.
  • 2Y yields are -0.8bps at 1.158%, 5Y -1.6bps at 1.601%, 10Y -1.8bps at 1.770% and 30Y -1.2bps at 2.097%. Lower breakeven inflation had been largely behind earlier rallies but has since largely reversed.
  • TYH2 stands towards the middle of the session’s range at 128-03 having earlier got close to testing resistance of 128-11+ (20-day EMA). Volumes remain low, approximately 80% of the average for the time of day.
  • Important data releases tomorrow with ULC/productivity for Q4 along with ISM Services for Jan before Friday’s payrolls.

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