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Tsys Futures Rally On Softer ISM Data, Focus Turns To  Friday NFP

US TSYS
  • Treasury futures gapped higher after ISM Services index data came out lower than expected (48.8 vs. 52.6). We still trade well off last week's highs with futures now back near late Friday's prices: TYU4 tapped 110-04 high , before ending the session at +0-18+ at 110-01+, while the front-end underperformed a touch with TUU4 hitting a high of 102-06⅜, before closing +0-03 at 102-04⅞ for the day.
  • It was a busy session for data: ADP employment modestly lower than expected in June at 150k (cons 165k) after a slightly upward revised 157k (initial 152k) in May, Initial jobless claims were slightly higher than expected at 238k (sa, cons 235k) in the week to Jun 29 after a marginally upward revised 234k (initial 233k). While factory orders -0.5% vs 0.2 est and Durable Goods came in inline at 0.1% vs 0.1% est.
  • FOMC Meeting Minutes were also out, with Federal Reserve officials needing no additional signs that inflation is heading back toward their 2% target before considering any interest rate cuts.
  • Treasuries remain vulnerable following Monday’s move lower and the contract is trading just above its recent lows. Initial support is now 109-02+/109-00+ (July 1 low/ key support), a break here would open a move to 108-27+ (June 3 lows). Resistance sits at 110-16/111-01 (Jun 28 high / 14 and the bull trigger).
  • Cash treasury curve bull-flattened on Wednesday with yields 3-8bps lower. The 2Y -3.5bps at 4.706%, 5Y -7.1bps at 4.324% while the 10Y was -7.3bps at 4.359%, the 2s10s was -3.972 at -35.343
  • Looking ahead, July 4th Holiday today with focusing now turning employment data on Friday.
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