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Climbing Off Lows, Inexplicable Post-Data Reversal

US TSYS
  • Treasuries look to finish Thursday's session weaker but well off morning lows, recovering ground after inexplicably reversing post-data strength (Treasuries blowing past overnight highs after the SNB cut rates by 25bps to 1.25%).
  • Treasury futures gapped higher, extend past early overnight highs after lower than expected housing data: Housing Starts (1.277M vs. 1.37M est), MoM (-5.5% vs. 0.7% est), Building Permits (1.386M vs. 1.45M est), MoM (-3.8% vs. 0.7% est).
  • Weekly Claims a little higher than expected at 238k vs. 235k est, continuing claims 1.828M vs. 1.810M est.
  • Rates quickly reversed support and extended session lows by midmorning (TYU4 marking 110-08.5 low). No obvious headline driver for the reversal, some desks suggested it was related to spec acct selling ahead of potential intervention by the BOJ as the US$/Yen climbed to new high of 158.88.
  • Others tied selling to incoming supply (multi-tranche jumbo issuance from Apple has been rumored), or to get ahead of selling from Norinchukin Bank after Nikkei reported last Friday they would unwind appr $63B in Tsy and EU longs by March 2025.
  • Whatever the reason, futures have been see-sawing off lows ever since, TYU near late overnight range at 110-17.5; 10Y yield +.0271 at 4.2497%.
  • Look ahead to Friday's data: S&P Flash PMIs, Leading Index, Home Sales.
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