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Sideways Trade Ahead Wed ADP

US TSYS SUMMARY
Relative calm sideways trade, Tsy yields declined while benchmark yield curves continued to steepen, focus on Wed's ADP private employ data.
  • After Mon's brief respite, the positive correlation between Tsy futures and equities turned back on: Bonds reversed gains as equities trade weaker in the first half, climbed back near session highs into the close as S&Ps pared losses (ESH1 -4.0). Little react to multiple Fed speakers, no substantive data
  • Yield curves holding steeper profiles, however, 5s30s +4.050 at moment, just off session high of 154.405 vs. last Thu's 7Y high of 166.984. Trade more two-way, positioning ahead Fri's Feb NFP, option and deal-tied hedging in the mix, rate paying unwinds in the intermediates to long end.
  • TYM technicals: Despite the recovery off last week's 131-31 low, the outlook in US 10y futures remains bearish. Price is still trading with the body of price action from Feb 25. In candle terms the pattern on this day is a bearish standard line - a continuation pattern
  • Option implied vols declined vs. bounce in underlying futures, ongoing heavy downside skew buying targeting late 2022 rate hike via Eurodollar options: total +50,000 (10k screen) short Dec 95/96 put spds 3.0 over short Dec 98 calls. Heavy corporate issuance, $10B Siemens 7pt jumbo lead day's total over $25B.
  • The 2-Yr yield is up 0.2bps at 0.1211%, 5-Yr is down 2.7bps at 0.669%, 10-Yr is down 1bps at 1.4068%, and 30-Yr is up 1.7bps at 2.2078%.
BulletMarketsFixed Income Bullets
BulletMarketsFixed Income Bullets

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