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Curve Bear Flattens, Powell In Focus


TYH3 deals at 113-14, -0-02, in line with levels seen late in the NY session.

  • Cash Tsys finished 6-19bp cheaper on Monday, the curve bear flattened. 2s10s spread closed at -82.7bp, a touch off the December lows of -85.2bp, which was the deepest level of inversion seen since 1981.
  • In a data light day Tsys ground lower.
  • The post-NFP and ISM services impetus continued yesterday as FI markets priced in higher for longer rates re: the Fed.
  • There were large volumes in options, particularly in SOFR, with flows favoring low delta puts and put spreads.
  • OIS markets are now pricing a 25bp rate hike in March, with ~20bp of tightening now priced into the May Fed meeting. The terminal rate is seen at 5.15%.
  • There was little reaction to comments from Atlanta Fed President Bostic, he noted his base case is for 2 more hikes and that there is a need to study if Jan jobs report was anomalous.
  • The latest RBA Monetary Policy decision headlines the Asia-Pac session, the Bank is expected to hike by 25bp. Further out we have US Trade Balance, which headlines an otherwise thin data slate. Fed Chair Powell speaks today for the first time since last week's Fed meeting, Fed VC Barr is also on the wires. 3-Year Tsy supply is also due.

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