Tight Asia Session Ahead Of NFPs

Tsys have moved away from best levels but remain in limited range. TYH2 +0-02+ at 128-19+ at typing, operating within a 0-05+ trading band, while cash Tsys sit little changed to 1.0bp cheaper across the curve. There has been a lack of meaningful news flow during asia hours, with participants focused on Friday’s NFP release. A block trade consisting of the sale of FVG2 120.00 puts (-15.0K) and FVH2 buying (+8K) headlined on the flow side.

• To recap, hawkish Fed re-pricing weighed on the front end and belly of the curve on Thursday. Benchmarks out to 10s cheapened by 1.5-5.0bp come the close of NY dealing as a result, with shorter dated paper leading the way lower. Meanwhile, 20s and 30s richened by 1-2bp. 10s briefly showed above 1.75% in yield terms for the first time since April ’21, before backing off, with some long end demand becoming evident as 10s crossed that level & 30-Year yields neared 2.15%. This resulted in a twist flattening dynamic. Hawkish Fedspeak from Bullard re: balance sheet normalisation failed to provide much, if any notable impetus, given the hawkish repricing witnessed since the release of the FOMC’s Dec meeting minutes. $IG issuance remained brisk, although was less seemingly less meaningful for Tsy price action when compared to earlier in the week. Flow of note included an FV block sale (-12,689) during the NY morning, while late trade saw a UXY block sale (-3.8K).
• As mentioned, focus is squarely on Friday’s NFP report, with the recent hawkish repricing in the front end of the Tsy curve & STIRs providing the potential for increased volatility if the dataset disappoints. Elsewhere, Fedspeak will come from ’24 voters Bostic & Daly.