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US TSYS: Tsys Curve Bull-Flatten, Focus Turn To Friday's Employment Data

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Tsys futures closed Wednesday's session much stronger, the rally was supported during US session from soft ISM services data, as well as from a 2.3% drop in WTI crude oil futures, gains for European bonds, and the Treasury Department’s quarterly supply announcement suggesting increases remain several quarters away. Long-end outperformed as curved saw a large flattening, TU closed +0-01¾ at 102-28⅞, while TY closed +0-17+ at 109-24 trading through key resistance.
  • The 10Y contract has nearly made it back to pre-Dec 18 FOMC levels, topping at 109-29 high before slipping back to 109-24 after the bell.
  • In tsys options, notable flows included a large buyer of March puts, fading the rally and targeting a 10-year yield rise to approximately 4.55% ahead of Feb. 21 expiry
  • Cash tsys yields saw large moves with the 20 & 30yr yields closed -11bps, curves bull flattened. The 2yr closed -2.7bps at 4.187%, while the 10yr closed -9.2% at 4.418%, after reaching a session low of 4.4001%. The 2s10s -6.344 to 23.336, 5s30s -2.856 at 39.718.
  • ADP employment was stronger than expected in January at 183k (cons 150k) along with a solidly upward revised 176k (initial 122k) in Dec. Meanwhile, December's goods and services trade deficit was slightly wider than thought at $98.4B.
  • No change to Treasury guidance on future issuance in the February Refunding policy statement, a modest dovish surprise vs many expectations that it would be watered down.
  • Projected rate cuts through mid-2025 gain slightly vs. Wednesday levels (*) as follows: Mar'25 at -4.2bp (-4.1bp), May'25 at -11.9bp (-11.2bp), Jun'25 at -22.7bp (-22.1bp), Jul'25 at -29.1bp (-28.6bp).
  • Focus remains on Friday's headline employment data for January.
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  • Tsys futures closed Wednesday's session much stronger, the rally was supported during US session from soft ISM services data, as well as from a 2.3% drop in WTI crude oil futures, gains for European bonds, and the Treasury Department’s quarterly supply announcement suggesting increases remain several quarters away. Long-end outperformed as curved saw a large flattening, TU closed +0-01¾ at 102-28⅞, while TY closed +0-17+ at 109-24 trading through key resistance.
  • The 10Y contract has nearly made it back to pre-Dec 18 FOMC levels, topping at 109-29 high before slipping back to 109-24 after the bell.
  • In tsys options, notable flows included a large buyer of March puts, fading the rally and targeting a 10-year yield rise to approximately 4.55% ahead of Feb. 21 expiry
  • Cash tsys yields saw large moves with the 20 & 30yr yields closed -11bps, curves bull flattened. The 2yr closed -2.7bps at 4.187%, while the 10yr closed -9.2% at 4.418%, after reaching a session low of 4.4001%. The 2s10s -6.344 to 23.336, 5s30s -2.856 at 39.718.
  • ADP employment was stronger than expected in January at 183k (cons 150k) along with a solidly upward revised 176k (initial 122k) in Dec. Meanwhile, December's goods and services trade deficit was slightly wider than thought at $98.4B.
  • No change to Treasury guidance on future issuance in the February Refunding policy statement, a modest dovish surprise vs many expectations that it would be watered down.
  • Projected rate cuts through mid-2025 gain slightly vs. Wednesday levels (*) as follows: Mar'25 at -4.2bp (-4.1bp), May'25 at -11.9bp (-11.2bp), Jun'25 at -22.7bp (-22.1bp), Jul'25 at -29.1bp (-28.6bp).
  • Focus remains on Friday's headline employment data for January.