FV Block Keeps Recovery From Session Cheaps In Check

The aforementioned block sale in FV futures (-7K/~$286K DV01) helps keep the Tsy rally away from session cheaps in check, with some weakness in Bunds & gilts also noted.

• Participants continue to attempt to assess the market impact of Moody’s late Friday move to revise the U.S. sovereign rating outlook to negative (Moody’s are the only 1 of the 3 major rating agencies that still give the U.S. a AAA rating), although knee-jerk modest softening for Tsys has been the limit of the feedthrough thus far.
• TYZ3 operates 0-01+ above its Asia-Pac base, last trading -0-04+ at 107-09, sticking to a tight 0-06 range thus far.
• The contract has had a look below initial support in the form of its 20-day EMA. A meaningful break of session lows would expose a bit of a technical air pocket, with nothing in the way of meaningful support then seen until the Nov 1 low (105-27+).
• Cash Tsy yields are 0.5bp higher to 0.5bp lower across the curve, with a very modest twist flattening bias observed.
• 2s10s and 5s30s sit a little above their respective month-to-date lows.
• FOMC-dated OIS is little changed to start the week.