OI Points To Long Cover As Dominant Positioning Factor Since Tuesday’s Close

The combination of yesterday’s weakness in Tsy futures and preliminary OI data points to a mix of net short setting and long cover across the curve since Tuesday’s close.

• OI data suggests that long cover provided the more meaningful positioning factor in net curve terms, with only TU futures seeing (modest) net short setting.
• Tsy yields respected their multi-week ranges, which, when coupled with some recent long setting in futures, helps explain some of the adjustment.
• From a fundamental perspective, the uptick in the prices paid sub-component of the Philly Fed survey countered the impact of a downbeat round of economic data on Thursday.
• An oil-driven uptick in breakevens and some widening in swap spreads (some pointed to set up for next week’s corporate supply) then applied further pressure.