Flat Start After Thursday’s Twist Flattening

A flat start for Tsy futures, as you would expect, given the lower liquidity backdrop surrounding Easter. That leaves TYM3 -0-03 at 116-14+, with little follow through from the late NY block buy in the contract (+2,075).

• The latest H.4.1 filing revealed that the size of the Fed’s balance sheet ticked down again, with rotation out of the discount window facility into the BTFP evident (with a slight moderation in net bank borriwng), while FIMA usage moderated
• The wider Tsy curve twist flattened on Thursday, with benchmarks finishing 5bp cheaper to 2bp richer.
• Higher than expected weekly initial jobless claims supported Tsys in early NY trade.
• Comments from St. Louis Fed President Bullard, who pointed to the need for the Fed to stay “at it,” with interest rates currently sitting in the lower end of what he deems to be a sufficiently restrictive range, did the flattening theme no harm, although there wasn’t much initial market impact given his previous musings.
• A block sale of FV futures (-12.7K) headlined on the flow side after block sales in TU & FV futures helped cap the post-jobless claims rally.
• Pricing of Fed rate cuts by year end pared back from session extremes as Tsys moved away from richest levels of the day.
• NFPs provide the headline risk event of the holiday-thinned session, with curtailed trading hours in futures and particularly short NY trading hours for cash Tsys in play owing to the Easter break. London is closed, while Tokyo, South Korea & China are the only major financial centres open in Asia.