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Tsy Off Lows Late, Set Sights On FOMC, Oct NFP Next Week

US TSYS
Futures volume surged heading into the close -- month end extensions w/ TYZ1 trading another appr 200k to 1.9m after the bell. Though futures finishing near late session highs, 10s mildly weaker/hold on narrow range since late morning.
  • Tsys followed EGBs lower on the open amid carry-over widening in sovereign spds after Thu's ECB policy annc (mkt underwhelmed w/ECB Lagarde presser: "not for her to say" if markets had got ahead of themselves; specs piling on rate hike bets targeting 3Q'22.
  • Rates held weaker levels after Sep core PCE climbs 0.2%, +3.6% YoY, yield curves bending flatter after posting mildly steeper earlier. Sources noted prop buying 30s vs. real$ sales.
  • Yield curves held flatter but off lows as futures turn steady to mixed by late morning, bonds outperformed Sources noted continued buying in 2s-3s from domestic real$ and central banks, not to mention the +15k block buys in 5s, has short end back to steady. Curve levels shows broad range of moves after 5s30s nearly dipped below 71.0 for first time since March 2020 (L: 71.144 / H: 81.21).
  • Aside from FOMC policy annc on Wednesday next week, markets get October employment data -- at the moment, mean estimate is +400k from 42 economists polled by Bbg with a range +250k to +700k.
  • By the bell the 2-Yr yield is unchanged at 0.4891%, 5-Yr is up 0.2bps at 1.1864%, 10-Yr is down 2.8bps at 1.5521%, and 30-Yr is down 4.3bps at 1.9383%.
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