Futures Soften As April Asia Trade Begins

A weaker start for the Tsy space as Asia-Pac participants react to late NY dealing, leaving TYM2 -0-13+ at 122-14+, 0-01 off the early session low after the contract breached Thursday’s worst levels.

• To recap, the curve finished 3bp cheaper to 3bp richer on Thursday, twist flattening, pivoting around 7s, with that point of the curve little changed come the bell.. There was a lack of support from month-/quarter-end rebalancing, even as equities sold off sharply (note that e-minis have edged away from their late NY lows), with volume surging late in the day, aided by block activity across the curve.
• Data provided little impetus for the space on Thursday.
• Continued geopolitical worry surrounding the payments for Russian energy meant that it wasn’t one-way trade, with notably weaker oil markets (on the telegraphed U.S. SPR release & potential for a co-ordinated IEA move) also impacting prices, although the Tsy market continued to flick between the inflationary & stagflationary narrative on that front.
• Breakevens were 5-17bp tighter on the oil price move, with the front end of the breakeven curve leading the tightening.
• Meanwhile, tightening of longer dated swap spreads promoted the aforementioned twist flattening of the Tsy curve.
• Still, Q122 represented the worst quarter ever when it comes to broad Tsy market performance.
• The latest Chinese Caixin m’fing PMI print headlines the Asia-Pac docket, while NY hours will be dominated by the latest NFP print (see our full preview of that release here: https://marketnews.com/mni-us-payrolls-preview-eyes-on-wages-slack). Elsewhere, the monthly ISM m’fing print & Fedspeak from Chicago Fed President Evans (’23 voter) are due.