Remaining Under Pressure

As noted elsewhere, the European reaction to the weekend catalysts (Fed Chair Powell’s interview and a hawkish BoJ sources piece in the FT) has allowed the overnight weakness in Tsys to extend further, with fresh session highs made in benchmark yields out to 10s, before a pullback from extremes.

• TYH4 last prints -0-14 at 111-07, 0-03 off the base of its early 0-17+ range. Volume prints at a comfortably above average run rate of ~467K.
• Meaningful support at the bear trigger (110-26) remains untested.
• Cash Tsy yields are 4-8bp higher as the curve bear flattens.
• The previously covered ~$200K DV01 FV/WN block flattener headlined on the flow side during Asia-Pac hours, with the NFP-Powell combination front and centre on the curve as rate cut pricing moves further away from recent extremes.
• On that front, FOMC-dated OIS last shows ~4.5bp of cuts for the March ’24 FOMC and ~115bp of cuts for ’24 on the whole, vs. late Friday levels of 5.5bp and ~124bp, respectively.
• A reminder that the notable long setting seen earlier last week (a little over ~$12.5mn DV01 equivalent of net longs were set across the Tsy futures curve on Wednesday) has probably factored into post-NFP/Powell price action.
• The ISM services & final S&P Global PMI equivalent will cross in NY hours, as will the SLOOS.
• We will also get Fedspeak from Bostic & Goolsbee, although the latter has already spoken in recent days.