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Game plan for Wednesday: Unless ADP comes out well off mean est (currently +860k): Set your clock for 0800ET for tomorrow's Tsy gap bid that runs to 1030ET, followed by a 50% retraces over next hour. This is how Bonds have reacted last two days. This wk's moves are not headline (China incursion into Taiwan airspace) driven or immediate risk-off in nature.
- Bond futures gap-bid at appr 0800ET the last two sessions, weaker stocks adding impetus to new duration highs in Tsys (ESM1 -47.0 at 4139.0 late), yield curves bull flattening, while the CBOE vol index VIX climbing +3.55 to21.85 high.
- Support Impetus speculation: not risk-off but accts unwinding net shorts as mean est' for Fri's NFP nears 1M, some desks say prop, fast$ and dealers that have been scaling back net short positions in Tsy and MBS inventories since February have accelerated. Blocks and stops exacerbating the current moves with cross asset hedging weighing on equities.
- 10Y futures Block buy (8.4k at 132-14, through a -13.5 offer) a more visible factor for support as 30YY slips to 2.2334% low, 10YY 1.5552%. Eurodollar and Tsy option trades consistently favored buying low delta puts outright or funded via upside calls.
- The 2-Yr yield is up 0.2bps at 0.1605%, 5-Yr is down 0.3bps at 0.8205%, 10-Yr is down 0.5bps at 1.5924%, and 30-Yr is down 1.7bps at 2.2668%.