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Japan Intervention, BOE Hike, New 15Y High Ylds, Curve Unwinds

US TSYS
Tsys broadly weaker at midday - off first half lows where ylds hit new 15Y highs (2YY 4.1587% after topping 4.0% in aftermath of Wed's 75bp FOMC rate hike; 5YY 3.9399%, 10YY 3.7118%). 2s10s bear steepened to -43.948 high compared to -57.943 low overnight.
  • Brief delayed reaction to BoE rate hike with long end Gilts under heavy pressure, Tsys followed suit while Tsys extending session lows (30YY taps 3.5241% high) following latest weekly claims of 213k vs. 217k est, prior revised to 208k.
  • What really turned up the heat on long end selling were unconfirmed rumors of Japan FinMin selling Tsys to support FX intervention (after similar occurred after after PBoC intervened in 2015, one desk said). Some desks questioned the logic of selling Tsys while yield curve control is still occurring.
  • Nevertheless, MOF intervention was confirmed selling US$ as well as Tsys to lesser degree -- What exacerbated the sell-off were speculative and fast$ accts selling bonds in anticipation of more intervention, trading desks said.
  • Heavy volumes (TYZ2>1.7M by midday) included buy-stops, several rounds of technical selling (TYZ2 slipped below 112-25+ Low Jun 11 2009), curve flattener unwinds/profit taking in the aftermath of Wed's post-FOMC flattening. Modest deal-tied flow and pre-auction short sets ahead final leg of wk's Tsy supply ($15B 10Y TIPS R/O) contributed to moves.
  • Currently, 2-Yr yield is up 7.2bps at 4.1201%, 5-Yr is up 13.8bps at 3.904%, 10-Yr is up 15bps at 3.68%, and 30-Yr is up 11.5bps at 3.617%.
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