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Busy Session on Data, Fed-Speak, Tsy Supply, Month-End

US TSYS SUMMARY
Fairly hectic session on decent volumes Thursday (TYM1>1.8M after the bell) with a lot of moving parts. Net change for Tsy futures after the bell mixed, near middle session range, curves steeper w/Bonds underperforming.
  • Data: Tsys drew immediate sellers after better than exp wkly claims (684K vs. 730K est; continuing claims 3.870M vs. 4.00M est). Decent 2-way trade followed as lvls held range on buy the dip and risk-off flow over deferred re-open plans and vaccine concerns (ongoing underlying theme).
  • Fed Speak: Rates and equities both sold off/pared gains around midmorning, desks hard pressed to explain the sharp drop in WNM1 ultra-bond that lead the retreat -- Fed Chair Powell NPR interview not the driver, comments innocuous despite mkt comparison to Dunkirk (!?). Mixed Fed speak from Clarida, Bostic and Evans through second half: Evans least optimistic: rates may hold until 2024.
  • Tsy supply: Another weak 7Y. Tsys sold off after US Tsy $62B 7Y Note auction (91282CBS9) drews high yield 1.300% vs. vs. 1.277% WI (huge 4bp tail last month: high yield of 1.195% vs. 1.155% WI); 2.23 bid/cover vs. 2.30 prior. Indirects drew 57.27% vs. 38.06% prior, directs 18.00% vs. 22.13%, dealers 27.73% vs. 39.81%.
  • Month-end rebalancing has market on edge, "Balanced mutual funds are expected to sell $136bn of equities to buy fixed income," according to JPMorgan estimates.
  • The 2-Yr yield is down 1.2bps at 0.1348%, 5-Yr is up 1bps at 0.8171%, 10-Yr is up 0.5bps at 1.6138%, and 30-Yr is up 2.6bps at 2.3358%.
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