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Bullish Price Structure Intact


Needle Points South


BLOCK, Huge 5Y Put Buy


Probes The Bear Trigger


Range Base Holds Firm

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Data-driven real-vol evaporated quickly early Wednesday, Tsys holding weaker levels on narrow range until an exceptionally strong 10Y Note auction stopped out just over 3bp spurred a sharp gap bid. Levels scaled back some post auction support to marginally mixed after the close.
  • Tsy futures surged after CPI Core miss (0.3% vs. 0.4% est), but just as quickly reverse (CPI MoM in-line with forecasted 0.5%) -- trading back near late overnight session lows. Volume surged on two-way flow, TYU >515k, yield curves bear steepened early.
  • Tsys reversed losses/surged higher after particularly strong 10Y Note auction stopped through just over 3.0bp through WI at auction cutoff with 1.340% high yield. Tsy 10Y yields fell to session low of 1.3000% before late session bounce to 1.3202%. 2.65x bid-to-cover well above five auction avg: 2.43x while indirect take-up surged to 77.25% vs. 61.16% 5M avg.
  • Fed speak was decidedly hawkish: Fed's George says 'Substantial Progress' already made; Dallas Fed Kaplan on CNBC (uber-hawk but non-voter) likes annc plan to taper at Sep FOMC, begin in October.
  • The 2-Yr yield is down 2bps at 0.2186%, 5-Yr is down 1.4bps at 0.8115%, 10-Yr is down 0.9bps at 1.3405%, and 30-Yr is up 0.6bps at 2.0048%.