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Markets Roundup: Banks Pare Gains, Curves Flatter, 2Y Note Sale Up Next

  • Tsys holding near session lows in late morning trade, yield curves bear flattening (2s10s -6.612 at -46.476, well off early high of -40.518) as regional bank share panic moderated to a degree this morning.
  • Early support for bank shares has cooled, however, giving up a more than half of their gains made on the open BKX currently +1.73 at 80.12 vs. 81.69 high (KBW: a modified cap-weighted index consisting of 24 exchange-listed National Market System stocks, representing national money center banks and leading regional institutions.)
  • Short end rates are still underperforming, front month 2Y futures -11 at 103-17.5 (2Y yield currently at 3.9529 vs. 3.9867% high), 10Y futures at 115-08.5 (10Y yield at 3.4884% vs. 3.5129% high).
  • From a technical standpoint early 10Y signals suggest that Friday’s candle pattern - a shooting star formation - represents a possible short-term reversal. If correct, this suggests scope for weakness towards the 20-day EMA, at 114-00.
  • No substantive reaction to Dallas Fed Manufacturing index data (-15.7 vs. -10.0 est, -13.5 prior).
  • Focus turns to $42B 2Y Treasury note auction at the top of the hour. WI is currently running around 3.927%, 78.6bp rich to last month's tail -- the sixth largest differential over the last 35 year.

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