Contained

A flat re-open for TYU2, last dealing -0-01 at 118-26+.

• To recap, the curve twist steepened on Thursday, with the major benchmarks running 1bp richer to 2bp cheaper across the curve, pivoting around 10s. Weakness in EGBs applied some pressure to the space in early London holiday-thinned European dealing, before the space found a bit of a base and richened into the NY morning. Data had little net impact, with softer than expected ADP employment providing some contained vol., while factory orders were softer than expected. Finally, weekly jobless claims data provided larger than expected dips across the 2 major metrics. Note that some pointed to widening long end swap spreads as a catalyst for the twist steepening of the curve, with eyes on the potential for M&A-related jumbo corporate issuance over the next week or so. A bid in equities also helped cap Tsys.
• Elsewhere, Fedspeak from Vice Chair Brainard played down the need for a September pause when it comes to the current tightening cycle.
• Pre-NY trade will be thin on Friday, owing to the observance of holidays in London, Hong Kong & China. Still, the monthly NFP print provides plenty of event risk ahead of the weekend. Friday will also bring the release of the latest ISM services survey and further Fedspeak from Brainard (although her address will focus on the Community Reinvestment Act, which likely limits the scope for meaningful policy discussion). Note that the Fed goes into its pre-meeting blackout ahead of the weekend.