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No Where Near Overnight Levels

Carry-over reflation theme from last week weighed on Treasury futures overnight, pushing yields to new 1Y highs (10YY 1.3925%; 30YY 2.1860%) yield curves climbing to new 5+ year highs briefly (5s30s 157.445, triple top from 2015).
  • Opinion from some trading desks the sell-off in futures was a bit overdone late last week (10YY +15bp last week, 2.15625%H Fri) took hold as US desks logged in. "The question of when higher rates start to impact equities has been moved to the top of the list," one desk offered.
  • Tsys bounced hard ahead the NY open -- little volume associated with the rally (overall volumes rather high due to surge in March/June rolling: half the 1.1M FVH volume tied to spd vs. June, ahead first notice Friday), while the large TYH block buy (15,435 at 135-13) added impetus to the move after the bell. Sporadic nature of the bid evident as flurry of selling from fast$ and prop accts knocking Tsys back to early overnight levels.
  • Additional early session flow: decent option-tied hedging vs. large 10Y puts trade, pick-up in deal-tied hedging and swap-tied selling in the short-end (2s-5s)

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