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Tsy/Eurodlr Derivatives Roundup, Focus On Thu's CPI Inflation Data


US FI markets clawed back some ground Monday after perhaps leaning a bit too far over it's skis after Fri's strong Jan jobs gain of +467k vs. +125k est (total up-revisions of +709k for Nov-Dec) as 30YY gained 8bp to 2.2312%; 10YY +10bp to 1.9302%. Markets overestimated Covid's drag on Jan employ gains and overreacted to the data by selling off too far as more aggressive rate hikes priced in.

  • Generally subdued start to next week, dearth of scheduled Fed speakers until Fed Gov Bowman and Cleveland Fed Pres Mester at separate events Wed, main focus on Jan CPI on Thursday (0.4% median est vs. 0.5% prior; 7.2% YoY est).
  • BLS will release seasonal adjustment factors are recalculated to reflect price movements from the just-completed calendar year late morning.
  • Eurodollar/Treasury option trade included a steady drip of repositioning and/or outright unwinds of March and June expirys as option accts look to longer dates for more relative value.
  • Other salient flow: Unlikely a hedge for hawkish Fed -- possibly a tactical play in event of a weak Tsy 3Y note auction (91282CDZ1), $50B sale Tues: +25,000 short Feb 98.00/98.12 put spds, 2.75 ref: 98.185.
  • Early Blocks: Conditional bear curve steepeners: with paper buying March, April and June 1Y midcurve put spds vs. Golds expiry put spds.
  • After the close, 2-Yr yield is down 1.4bps at 1.2964%, 5-Yr is down 0.3bps at 1.765%, 10-Yr is up 0.9bps at 1.9177%, and 30-Yr is up 1.1bps at 2.2214%.

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