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US TSYS: Tsys Futures Find Support Ahead Of PPI

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • It has been a quiet session for Tsys after a sell-off overnight following stronger-than-expected CPI. The 2yr is hovering near it's highest levels since July, however earlier JPM put out a buy recommendation on the 2yr, we then saw heavy block buying in the TU contract with a total of 26k TU contracts blocked across four trades for DV01 $955k. TU is currently +01¾ at 102-19+, while TY is +05 at 108-13+
  • Key levels to watch on the TY contract are, initial resistance at 109-10 (50-day EMA) above here 110-00 (High Feb 7 and the bull trigger), while to the downside, initial support is at 108-00 (Low Jan 16)
  • Cash tsys yields are trading 1-2bps richer today, the curve has steepened slightly. The 2yr is -1.9bps at 4.336%, while the 10yr is -1.2bps. The 2s10s is +0.5bps at 26.710.
  • JPM see value in 2yr tsys, noting that markets now price in just one more Fed rate cut for this cycle. They highlight that yields are near the top of a well-established range, making the front end attractive. The main risk would be unexpected labor market tightening, but with the next jobs report still weeks away, this isn’t an immediate concern.
  • The 2yr has spent the past 4 months trading between 4.40% and 4.20% after hitting a low of 3.50% in September, we last trade at 4.345%.
  • OIS pricing has firmed slgihtly during Asia today, following last nights stronger-than-expected CPI number, we saw OIS push the expected rate cut out to December from September, however we are now back to pricing in a full cut in October (note there is no November meeting).
  • Later today the focus will be on US PPI data, consensus is for 0.3% m/m in Jan, up from 0.2% in December, we also have Jobless claims which are expected to come in at 216k, down from 219k.
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  • It has been a quiet session for Tsys after a sell-off overnight following stronger-than-expected CPI. The 2yr is hovering near it's highest levels since July, however earlier JPM put out a buy recommendation on the 2yr, we then saw heavy block buying in the TU contract with a total of 26k TU contracts blocked across four trades for DV01 $955k. TU is currently +01¾ at 102-19+, while TY is +05 at 108-13+
  • Key levels to watch on the TY contract are, initial resistance at 109-10 (50-day EMA) above here 110-00 (High Feb 7 and the bull trigger), while to the downside, initial support is at 108-00 (Low Jan 16)
  • Cash tsys yields are trading 1-2bps richer today, the curve has steepened slightly. The 2yr is -1.9bps at 4.336%, while the 10yr is -1.2bps. The 2s10s is +0.5bps at 26.710.
  • JPM see value in 2yr tsys, noting that markets now price in just one more Fed rate cut for this cycle. They highlight that yields are near the top of a well-established range, making the front end attractive. The main risk would be unexpected labor market tightening, but with the next jobs report still weeks away, this isn’t an immediate concern.
  • The 2yr has spent the past 4 months trading between 4.40% and 4.20% after hitting a low of 3.50% in September, we last trade at 4.345%.
  • OIS pricing has firmed slgihtly during Asia today, following last nights stronger-than-expected CPI number, we saw OIS push the expected rate cut out to December from September, however we are now back to pricing in a full cut in October (note there is no November meeting).
  • Later today the focus will be on US PPI data, consensus is for 0.3% m/m in Jan, up from 0.2% in December, we also have Jobless claims which are expected to come in at 216k, down from 219k.