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Post-CPI Chop; SLR Extension Debate

US TSYS SUMMARY
Choppy first half, Tsy futures see-sawed following CPI: Core +0.1015% M/M unrounded, so firmly bottom of 0.1-0.3% expected range and 0.2% median. Mainly due to drop in core goods prices, -0.2% M/M, lowest since May 2020. Core services were +0.2%, highest since Nov 2020.
  • Decent early two-way as Tsys drew fast$ selling on bounce, while buyers reloaded. Appr 95,000 TYM traded in the five minutes after the CPI data release, from 132-08 to -13.5, 132-11.5 high volume price.
  • Another day closer to SLR deadline on March 31, participants still expect extension. Buy the rumor, sell the fact.
  • Rates extended top end of range ahead the $38B 10Y note auction re-open, sold off briefly after small tail: drawing 1.523% high yield (1.155% last month) vs. 1.520% WI; 2.37 bid/cover (2.37 previous).
  • After some chunky flatteners Blocked in prior session, steepeners gained momentum: On the heels of lar +18,934 TYM blocked 132-11, second leg showed up: -4,638 WNM at 187-16 -- post-time bid at 0935:37ET. Appears to be steepener, $1.6M dv01.
  • Option flow continued to revolve around puts with some notable consolidation: -20,500 TYK 128/131.5 put spds, 35-33 (unwind, paper +30k 45-47 Monday).
  • The 2-Yr yield is down 0.6bps at 0.1548%, 5-Yr is down 1.3bps at 0.7923%, 10-Yr is down 0.3bps at 1.523%, and 30-Yr is up 1.4bps at 2.2479%
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