Curve Twist Flattens, Block Flow & Data Eyed Thus Far

As noted elsewhere, the early block flow (7K/$438K DV01) of TY buying across two clips, coupled with the mix of UK and already released flash European PMI data, has allowed yesterday’s long end bid to extend further.

• TYZ3 is +0-03 at 106-18+, 0-03+ off the top of its 0-13+ range.
• The contract has breached initial technical resistance in the form of the Oct 18 high (106-15+). A meaningful breach of early session highs would turn focus to the 20-day EMA (107-08, which protects key resistance in the form of the October 12 high (108-16). Technical conditions remain bearish below the latter level.
• Cash Tsy yields run 1.5bp higher to 4.5bp lower, twist flattening.
• The presence of the impending round of 2-Year Tsy supply may be providing some headwinds for the shorter end of the curve.
• 10-Year Tsy yields now sit over 20bp off of yesterday’s fresh cycle high, printing 4.815% last. Lows of 4.80% have been registered thus far.
• A quick reminder that Asia-Pac hours saw 6K/~$375K DV01 of block sales in TY futures.
• Discussions re: the severity of yesterday’s swings in Tsys dominated discussions in Asia.
• Terminal policy rate pricing on the FOMC-dated OIS strip shows ~10bp of further tightening in the current cycle (through January ’24). Beyond there, ~57bp of cuts are priced through September ’24 (vs. current terminal pricing levels).
• Looking ahead, flash PMI data and regional Fed economic activity metrics will cross in NY hours.