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Market Roundup: Volatile First Half on Data, BOE/ECB Policy Reacts

US TSYS
Bonds continue to extend session highs (30YY 3.4622% low ahead midday vs. 3.5605% post-ECB high) curves bull flattening on robust volumes (TYH>800k) following a volatile early session.
  • Little early react to expected 50bp hike from the BOE - but not the case following the ECB announcement: Tsys pared gains after the ECB hiked 50bp to 2.0%, main focus on persistent inflation at 6.3% in 2023 (5.5% forecast).
  • Data driven rebound: Tsys bounced off hawkish ECB guidance lows to new session highs (30YY back down to 3.5042% couple minutes after tapping 3.5605% high) following Empire Manufacturing sharply lower than expected at -11.2 vs. -1.0 est, weekly claims lower than expected at 211k vs. 232k est, retail sales weaker at -0.6% vs. -0.2% est.
  • Real vol continues to deliver: Tsys scaled off post-data highs amid hawkish comments from ECBs Lagarde regarding 50bp hikes "for some time".
  • While weaker than forecasted data (claims, retail sales and NY mfg index) helped futures jump off post-ECB lows to new session highs, yield curves remain stubbornly flatter: 2s10s -6.648 at -80.667.
    • In-line trade: large 5s/10Y ultra-bond flattener block: -18,125 FVH3 109-10, sell through 109-13.5 post-time bid vs. +8,079 UXTH3 121-30, through 121-29.5 post-time offer.
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