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Higher Ylds, Steeper Curves, 5s30s Breach 2015 Triple Top


Futures have quietly drifted back to pre-NY open levels, weaker across the board to around middle of overnight range. Heavy overall volumes (3.35M TYH1) closer to average when taking surge in March/June rolls into account (835k TYH/TYM).

  • Active participants have migrated to sidelines ahead Fed Chair Powell's semi-annual mon-pol testimony to Senate Banking Comm at 1000ET Wed. Note, officials have pre-released testimony around 0830ET in past - have not advised intention to do so. Unless Senate chooses to disclose the release time and advisory comes from the Fed then details are technically off the record and for planning only.
  • Carry-over reflation theme from last week weighed on Treasury futures overnight, pushed yields to new 1Y highs (10YY 1.3925%; 30YY 2.1919%) yield curves climbed to new 5+ year highs (5s30s 159.336 vs. triple top from 2015 of 157.445, ).
  • Early short covering, while LaGarde comment ECB is "CLOSELY MONITORING LONGER-TERM NOMINAL BOND YIELDS" Bbg and large TYH block buy (15,435 at 135-13) added impetus to gap bids in first half. Sporadic selling from fast$ and prop accts weighed followed by decent option-tied hedging vs. large 10Y puts trade, pick-up in deal-tied hedging and swap-tied selling in the short-end (2s-5s).
  • The 2-Yr yield is up 0.8bps at 0.1129%, 5-Yr is up 2.3bps at 0.5986%, 10-Yr is up 3.9bps at 1.3755%, and 30-Yr is up 5.8bps at 2.1919%.

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