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- Thu's bull flattening largely result of Wed's FOMC, upping DOTS to pencil in two rate hikes by late 2023. Some technical buying while shorts caught wrong-footed, forced to unwind, exacerbating the move. Long end Tsy Bonds clawed higher, 30YY fell to 2.0468% low (mid-Feb level), 10YY around 1.5% after slipping to 1.4702% low -- stable by comparison.
- Aside from tight stops getting triggered on the rally in long end, curve steepener unwinds contributed: TD Securities reports they are taking off a 5s30s steepener as well as 9Y TIPS BE position. TD explained "reflation trades suffered a significant setback after the Fed delivered a hawkish message at the June FOMC — raising the 2023 dots, upgrading the SEP, and sending a message that tapering discussions had begun. This more hawkish message has led to a significant paring of reflation trades, with short covering exacerbating the moves.
- TD added the "initial curve steepening was driven by a selloff in the 5y sector as the market pulled forward tapering and hike expectations. However, the flattening has been replaced by short-covering buying, exacerbating the move."
- The 2-Yr yield is up 0.6bps at 0.2113%, 5-Yr is down 2.1bps at 0.8744%, 10-Yr is down 6.6bps at 1.5091%, and 30-Yr is down 10.9bps at 2.0982%.