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More Pain Trade for Rate Bears

US TSYS SUMMARY
Another day of pain for staunch shorts willing or able to hold onto positions. Yields receded to levels not seen since early Feb, 30YY fell to 1.8551% low, 1.8852% last; 10YY 1.2479% low and testing 200DMA before paring back midday.
  • Coincidentally, Tsys peaked/started to recede around time ECB strategy review released (in-line: adopting symmetric 2% inflation target expected).
  • No immediate reaction to weekly claims climbing 2k to 373k -- higher than est of +350k, while continuing claims recedes slightly (-.145M to 3.339M vs. 3.35M exp).
  • Both rates and equities are traded back near the middle of their respective ranges after the rates closing bell: Tsys but well off highs (5s30s yield curve actually a little steeper on day at 117.129 (+1.395) while equities were weaker ESU1 -43.0 at 4306.75 vs. 4279.25 low.
  • Heavy volumes traded on day with lions share of TYU1 1.75M occurring before midday. Heavy option volumes with call skew outpacing puts for first time in over a year. Nevertheless, willing put buyers and existing long put positions continued to fade the underlying rally.
  • The 2-Yr yield is down 2.4bps at 0.1904%, 5-Yr is down 4.3bps at 0.7356%, 10-Yr is down 3bps at 1.2862%, and 30-Yr is down 2.9bps at 1.9091%.
  • Friday focus on June CPI: MoM (0.6%, 0.5% est); Ex Food and Energy MoM (0.7%, 0.4% est).
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