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Price Signal Summary - S&P E-Minis Bear Threat Still Present


UK Inflation sets the tone for core FI


6/12-month BT


Leads against the Dollar

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Tsys remain under pressure in late trade, 30Y looking to extend recent session lows even as equities trade weaker/off lows amid sporadic program selling -- squaring up ahead the extended holiday weekend.

  • Yield curves only mildly steeper despite the better long end selling, 5s30s just over 56.78 in late trade; 30YY climbs to 2.1212% (shy of Mon's 2.1491% high); 10YY tapped 1.7770% vs. Mon's 1.8064% high.
  • Rates took the large Dec Sales miss in stride: headline -1.9% M/M vs -0.1% expected, with ex-auto/gas -2.5% vs -0.2% expected -- trimming losses w/stocks to session highs by midmorning. Ongoing geopol tension between US and allies vs. Russia over Ukraine border troop build.
  • Steady refrain from hawkish Fed officials underscoring 3-4 .25bps hikes (more likely the latter) starting in March emboldened sellers and option hedgers. Fed enters media blackout at midnight through Jan 27, day after FOMC annc.
  • With March becoming a crowded trade, option accts started shifting focus to mid-year (give or take a month or two) for more aggressive lift-off than currently priced in. For context: Fed Waller suggested during Bbg interview late Thu that if inflation remains high “the case will be made for four, maybe five hikes”.
  • Near a perfect storm really for edge/potential profitability in putting on risk abatement hedges or simply for speculation – June was main focus today w/ paper buying June 98.93/99.06/99.18 put fly buyer -- EDM2 is at 99.265 -- looking for underlying to drift near that center strike for max profit. Anecdotal observations: implieds elevated, put skew still favored
  • The 2-Yr yield is up 7.2bps at 0.9648%, 5-Yr is up 7bps at 1.5428%, 10-Yr is up 6.2bps at 1.7663%, and 30-Yr is up 6.4bps at 2.1066%.