August 12, 2022 15:22 GMT
Rather decent volumes by midmorning (TYU2>815k), yield curves bull flattening on mixed reactions to data and Fed speak.
- Muted reaction to early deflationary data: Import (-1.4%)/Export (-13.3%) prices come out weaker than expected. Tsys that were already off highs after the open continued to scale back support, albeit on light volumes, equities turning modest gains.
- Dual react: Tsy support faded after preliminary August reading of consumer sentiment from the University of Michigan climbed to 55.1 vs. 52.5 exp (51.5 in July and all-time low of 50.0 in June for comparison).
- Meanwhile, Richmond Fed Barkin midmorning comments on CNBC deemed mixed with "more rate hikes needed to control inflation" and a "lot of time before Sep meeting, keep an eye on data" weighing. Less hawkish tones in the mix with "TIGHT LABOR MARKET DOESN'T HAVE TO CAUSE INFLATION; DEMAND DEFINITELY SOFTENING, ESP FOR LOW-INCOME CONSUMER; MUST BELIEVE BAL-SHEET SHRINKING HAS TIGHTENING EFFECT."
- Tsys climbing again but off early highs while yield curves remain flatter (2s10s -5.409 at -38.916 vs. -40.788 low. Blocks certainly contributing to yield curves paring back this week's steepening post UofM: -11,421 TUU2 104-20.88, sell through 104-21 post-time bid at 1010:56ET vs. +3,960 UXYU2 128-31.5 buy through 128-28.5 post-time offer; -25,033 FVU2 112-09.5 sell through 112-09.75 post-time bid at 1036:45ET, 112-09.25 last -.25.
- Technicals for TYU2 currently trading 119-08.5 (+5.5), contract has breached trendline resistance at 119-16. The trendline is drawn from the Jun 16 low. The recent move lower is still considered corrective, however, the trendline break suggests a deeper retracement is likely near-term. This has opened 118-05, a Fibonacci retracement. Initial resistance to watch is 120-22, the Aug 10 high. A break would signal a possible bullish reversal.