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Finds Support Below The 50-Day EMA


Bullish Doji Candle


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TYH2 has pulled back from best levels, last +0-04 at 130-23, while cash Tsys run ~1.0bp cheaper to ~1.0bp richer across the curve (2s have slipped into negative territory, while the belly & longer end has richened modestly on net). The Senate’s approval of a stopgap funding deal to prevent a government shutdown has probably helped the space off of highs (even if it just kicks the can down the road), with markets starting to fade the initial knee-jerk bump higher which was seen on the back of a handful of Omicron cases springing up across the U.S. (a reminder that the mortality threat of the new COVID strain remains unknown, although markets remain jittery around related headlines). E-minis are now flat to higher on the day, with a reversal in the Hang Seng’s early losses and a bid in oil prices no doubt helping to pressure Tsys away from highs. Cleveland Fed President Mester (’22) offered nothing new in an FT interview, reiterating hawkish utterances from earlier in the week.

  • To recap, the curve bear flattened on Thursday, 3s provided the weak point, cheapening by 8bp, while 30s cheapened by ~2.5bp come the bell. Hawkish Fed rhetoric re: the tapering pace from Quarles (outgoing Governor), Barkin, Daly & Bostic provided the flattening impetus, while a reversal in crude oil futures, resulting in higher oil prices on the day, also weighed into the bell. 8-part jumbo issuance from Daimler Trucks also applied pressure. When it comes to the Fed hiking cycle, the OIS strip prices the first 25bp hike at the end of the Fed’s Jun ’22 meeting, with another hike priced by the end of the Nov ’22 gathering (per BBG WIRP). Further out, the Eurodollar strip is starting to indicate the potential for a rate cut in ’25, with the EDZ4/Z5 spread moving into incremental negative territory. Block flow of note included a TU/UXY steepener (+11,000/-3,500) during the latter part of the NY morning and an outright UXY block buyer (+5,182) in the early part of the NY afternoon.
  • NFPs and the latest ISM services survey print will headline during NY hours. We will also hear from St. Louis Fed President Bullard (’22 FOMC voter) ahead of the pre-FOMC blackout period.