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Modest Retracement Of Wednesday's Significant Rally, Further Labor Data Ahead

US TSYS
  • Cash Tsys trade 2-3bp cheaper, with the sell-off led by 7s. It’s only a modest paring of yesterday’s large rally seen driven by a melting pot of soft data, NYC Bancorp news and month-end extension-related flow underpinning Tsys yesterday, even during Powell-/FOMC-inspired pullbacks.
  • TYH4 trades in narrow ranges around 112-13+ on large volumes of 485k. Yesterday saw a fresh high of 112-20+ in another step closer to resistance at 112-26+ (Jan 12 low), continuing to go against a bearish trend.
  • Ahead, an open BoE decision could provide some spillover before attention turns to labor data with productivity watched closely. Yesterday’s softer than expected ECI is starting to ask less of productivity growth to see wage growth consistent with the 2% inflation target. Challenger job cuts also provide some interest ahead of nonfarm payrolls on Friday, as do jobless claims although the latter don’t cover a payrolls reference week coming so close to the release.
  • Data: Challenger Job Cuts Jan (0730ET), Productivity/ULCs Q4 (0830ET), Weekly claims (0830ET), S&P Global Mfg PMI Jan final (0945ET), ISM mfg Jan (1000ET), Construction spending Dec (1000ET).
  • Bill issuance: US Tsy $95B 4W, $90B 8W bill auctions (1130ET)

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