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Tsys Have That Heavy Feeling, FOMC Next Week

US TSYS SUMMARY
Tsys traded broadly weaker/near lows late Friday, yields making new one-year highs, steeper yield curves climbing back to near 7 year highs tapped Feb 25. Much of the initial choppy sell-off occurred overnight as Tsys followed Bunds lead lower for second day, US$ strength persisted. Focus on next week's FOMC and BoE policy announcements.
  • Not much of a react to PPI, more or less in-line with expectations (FINAL DEMAND PPI +0.5%, EX FOOD, ENERGY +0.2%). Tsy futures holding to relative narrow range -- near lows over last four hours. Moderate buying in 10s-30s was short lived.
  • Lack of clarity adding to pressure in rates: another day closer to Supplementary leverage ratio (SLR) exemption expiration on Wed, Mar 31, and still no word from Fed gov's over extending (widely expected) or letting it expire -- necessitating banks to scale back their deposits, reserves, and Tsy holdings.
  • Decent option trade, put buys/heading rate hikes in late '22 through '23 continue; vol sale on range: Block, -40,000 short Sep 96/97 strangles, 12.0 vs. 99.67, -5.6k more/screen. Salient Tsy option highlight: +32,000 TYM 129/130/131/132 put condors 12 on screen.
  • The 2-Yr yield is up 1bps at 0.149%, 5-Yr is up 5.9bps at 0.8449%, 10-Yr is up 9.7bps at 1.6335%, and 30-Yr is up 10.6bps at 2.4005%.
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