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US TSYS: Tsys Futures Rally, Following Risk Off Move, 10yr At 4.31%

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Tsys futures rallied on Friday following a risk-off move as South China Morning Post reported on a new bat coronavirus study made the rounds with traders, futures were already well supported during the morning session following US data which included soft PMI services and a final University of Michigan sentiment print below estimate. TU closed +04⅜ at 102-28⅜, while TY closed +16+ at 109-22.
  • Cash tsys yields closed roughly 7bps richer on Friday, with the belly of the curve out-performing slightly. The 2yr closed -7.1bps at 4.198%, while the 10yr closed -7.4bps at 4.431%. The 2s10s closed -0.5bps at 22.904.
  • Hedge funds significantly covered net short positions in 5-and 10yr futures, totaling ~$17.6m/DV01, with overall short covering across the curve reaching ~$22.7m/DV01 for the week ending Feb. 18, per CFTC data. Asset managers, meanwhile, reduced long positions broadly, including $5.1m/DV01 in 5y notes and $3m/DV01 in 10y notes.
  • Fed's Goolsbee downplayed the recent rise in consumer inflation expectations, stating that one month of data isn’t sufficient to draw conclusions. The University of Michigan’s survey showed long-term inflation expectations hit 3.5%, the highest since 1995, largely driven by Democratic respondents. He also emphasized the need for multiple months of data before it impacts Fed policy decisions.
  • Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
  • There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity
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  • Tsys futures rallied on Friday following a risk-off move as South China Morning Post reported on a new bat coronavirus study made the rounds with traders, futures were already well supported during the morning session following US data which included soft PMI services and a final University of Michigan sentiment print below estimate. TU closed +04⅜ at 102-28⅜, while TY closed +16+ at 109-22.
  • Cash tsys yields closed roughly 7bps richer on Friday, with the belly of the curve out-performing slightly. The 2yr closed -7.1bps at 4.198%, while the 10yr closed -7.4bps at 4.431%. The 2s10s closed -0.5bps at 22.904.
  • Hedge funds significantly covered net short positions in 5-and 10yr futures, totaling ~$17.6m/DV01, with overall short covering across the curve reaching ~$22.7m/DV01 for the week ending Feb. 18, per CFTC data. Asset managers, meanwhile, reduced long positions broadly, including $5.1m/DV01 in 5y notes and $3m/DV01 in 10y notes.
  • Fed's Goolsbee downplayed the recent rise in consumer inflation expectations, stating that one month of data isn’t sufficient to draw conclusions. The University of Michigan’s survey showed long-term inflation expectations hit 3.5%, the highest since 1995, largely driven by Democratic respondents. He also emphasized the need for multiple months of data before it impacts Fed policy decisions.
  • Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
  • There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity