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TYF2 Upside Demand


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A Touch Softer As Asia Desks Settle In

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A flat start to the Thanksgiving trading session for futures, with TYZ1 +0-00+ at 129-27, after the contract went out around the middle of its NY range on Wednesday. The curve was subjected to twist flattening pressure, with 2s and 3s 2.5bp cheaper, 5s little changed and 30s ~6.5bp richer. The 5-/30-Year yield spread printed yet another YtD flat in the process, after the long end rebounded from session cheaps.

  • San Francisco Fed President Daly, one of the more dovish members of the current Fed cohort, took markets by surprise early in the NY day, pointing to an openness re: a faster tapering timeline, although she did note that she would need to see more data before making such a decision. This pressured the front end of the curve, with further Fed rate hike premium baked in.
  • A much larger than exp. fall in initial jobless claims was seen (with the print hitting the lowest level witnessed since the '60s), while personal spending & income data beat expectations as the headline PCE readings roughly met broader exp, ticking up from the previous month.
  • There was no real reaction to the minutes from the latest FOMC meeting, with worries re: longer lasting inflationary forces, the potential for a faster tapering timeline and risks of a quicker than envisaged start of a hiking cycle if inflationary pressures persist presenting the major takeaways.
  • A reminder that Cash Tsys are closed owing to the Thanksgiving holiday, with futures subject to shortened holiday trading hours.