Overnight Eurodollar Flows Steals Headlines As Familiar Risks Persist

T-Notes clung to a tight range overnight, last unch. at 139-04, with yields sitting 0.2-0.7bp richer across the cash Tsy curve. Flows were eyed, with some focus on the downside via light screen interest in the 1x2 TYZ0 137.00/135.00 put spread. The familiar sources of risk that we flagged early in Asia-Pac hours on Thursday have dominated news flow during the last 24 hours (namely the fiscal impasse in DC, COVID worry, most notably in Europe, the ongoing Brexit saga and to a degree, Sino-U.S. tensions). Initial jobless claims data went in the wrong direction on Thursday, at least in terms of the health of the economy, while regional activity indicators were mixed. The overarching risk negative factors supported the space in early Thursday dealing, before the bid faded and yields across the cash Tsy curve finished unchanged to 1.0bp cheaper, with the retrace coming in line with a recovery in equities.

• Eurodollar futures sit unchanged to 0.5 tick higher through the reds on heavy volume. Here, a combination of block and screen sales in EDM1 and on screen steepener flow in EDU2/U4 received attention, especially given the lack of headline flow that was evident overnight.
• Retail sales, industrial production & the Uni of Michigan confidence reading headline the local docket on Friday. We will also hear from Fed's Williams and Bullard.