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Fading Canada Jobs Move, Tsys Weaker Ahead Next Wks FOMC, ECB, Boj Annc

  • Treasury futures holding modestly weaker levels after the bell, near the middle of a decent session range. On what would have been a quiet Friday session ahead next week's FOMC (Wed), ECB (Thu) and BOJ (Fri) policy announcements, futures gapped off weaker levels following a drop in Canada employment data (-17.3k vs. +25k exp).
  • Treasuries scaled back from post-Canada employment data induced highs, levels are back near opening levels with front month 10Y futures at 113-13 (-10.5). Curves extend inversion (2s10s -5.543 at -85.851) as short end rates underperformed ahead next week's bill and coupon supply (large 2s/30Y ultra flattener also note: -13,328 TUU3 102-13.75, through 102-14.12 post-time bid vs. +2,364 WNU3 135-12.
  • Fed Funds implied rates are drawing to the end of the week with yesterday’s initial claims spike still weighing on pricing for next week’s FOMC but meetings later on in the year having clawed back the drop.
  • The further trimming of cuts sees just 24bp from July’s terminal to year-end and 38bp from July to Jan for the smallest since Mar 09 as rate cut expectations began to surge on regional banking woes.
  • Cumulative changes from current 5.08% effective: +7bp Jun (+0.5bp on the day), +20bp Jul (+0.5bp), +18.5bp Sep (+1.5bp), +9bp Nov (+2.5bp), -4bp Dec (+3.5bp) and -18bp Jan (+5bp).

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