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Market Roundup: Weak Data Reverses Post-ECB Sell-Off

US TSYS
Tsys continued to extend session highs after initially selling off after the ECB hiked 50bp. Current levels just off the top end of wide range on decent volumes, yield curves flatter despite strong buying in 2s and 5s (2s10s -2.711 at -23.197).
  • Brief post-ECB hike sell-off in Tsys say 30YY hit 3.2035% high. Tsys bounced on weak US data soon after: weekly jobless claims higher than expected at 251k vs. 240k, continuing claims 1.384M vs. 1.340M est, sharp miss on Philly Fed Mfg index at -12.3 vs. 0.8 est. Positive spin for stocks: data miss deemed positive in relation to watering down hawkish forward Fed expectations.
  • Second leg higher: Tsys continued to extend session highs with the rally in European core sovereign with the front-loading aspects and not moving an assumed terminal rate.
  • Underscoring rally amid some stop-outs: Huge 5Y Block buy: +40,000 FVU2 111-24, buy through 111-20.75 post-time offer at 0915:30, 111-27 last +11.75.
  • Long end seeing selling by bank and real$ accts ahead midday. While a 75bp hike next week remains priced in, probability of a third consecutive 75bp move at the September meeting has started to ebb.
  • Technicals for TYU2: back above the 118-00 handle to mount a test on first key resistance at 119-06, the Jul 13 high. This keeps the short-term outlook bullish and supports the view that pullbacks are deemed corrective for now. Key short-term support is at 116-11, Jun 28 low where a break would strengthen a bearish threat and signal scope for a deeper retracement.

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