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Bullish Price Sequence

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Risk appetite improved Thursday, rates holding narrow range near lows since late morning while equities surged -- Dow surged over 600.0 at one point while eminis traded +60.0 at 4444.0 after the FI close, US$ index DXY -.418 at 93.044.

  • Brief risk-off move ahead the NY open as China's Evergrande continued to roil markets. Early risk-on tone scaled back slightly after headlines that Chinese officials told "local governments to prepare for downfall" (DJ) of real-estate developer.
  • Quickly discounted, risk-on tone gained momentum into midday as participants ruminated over timing and speed of tapering as precursor to lift-off. Main takeaway from Fed Chair Powell's presser: reinforcement that taper very likely annc in Nov barring a poor Sep jobs report (mark your calendar for Fri October 8 ). Re: Sep payrolls report, Powell actually said he's looking for a "reasonably good one" and later a "decent" one, and NOT a "knockout, great, super strong employment report".
  • Little react to weekly claims, +16K to 351K; continuing claims +0.131M to 2.845M
  • Bonds more than reversed post FOMC gains, yield curves bear steepening -- while 5s30s held below 100bp, front end curves surged: 2s10s +8.5 at 114.7 -- near last Fri's high print -- that married up with strength in financials / banks today.
  • Decent overall volumes as yields climbed, two-way deal-tied hedging on $10B corp supply, some option hedging ahead Fri's Oct Tsy expiration.
  • The 2-Yr yield is up 2bps at 0.2567%, 5-Yr is up 7.8bps at 0.9286%, 10-Yr is up 10.6bps at 1.4061%, and 30-Yr is up 11.3bps at 1.9207%.