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US TSYS: Tsys Yields Rise Following Non Farm Payrolls

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Tsys futures were lower on Friday, following softer than expected in January Non-farm payrolls, we also saw 1Y forward inflation expectations in the UMichigan survey for February (to 4.3% from 3.3% in January), which saw tsys take another leg lower, however brief risk-off support arrived after Pres Trump headlines suggested reciprocal tariff's in the near term (rather vague - Trump is expected to discuss details at a press conference next Tuesday. TU closed  -04+ at 102-23⅛, while TY is trading -11 at 109-07+.
  • Weakness in the long-end was supported by block trades, including a large $1.25m/DV01 seller in the ultra-long bond futures.
  • Cash tsys curves bear-flattened, with yields closing +5 to +8bps across the curve. The 2yr closed +7.6bps at 4.289%, while teh 10yr closed +6.1bps at 4.495%. The 2s10s fell 1.5bps at 20.335 while the 2s20s -2bps at 45.5bps.
  • Nonfarm payrolls were softer than expected in January alone at 143k (cons 175k) but the latest two-month revision of +100k more than offset this (almost evenly split across Dec and Nov). As such, the 143k followed two even stronger than previously thought months with 307k in Dec and 261k in Nov.
  • Fed-dated OIS was pricing in approximately 35bp of rate cuts for the year vs. 42bp priced at Thursday close with the first full 25bp of easing moving out to the September policy meeting from July prior
  • In SOFR options, there was a standout trade that included a large play on no Fed rate cuts this year via a Sep25 put fly, paying a premium of around $8m over the US morning session
  • There is little on the calendar today, focus this week is on Powell's testimony to Congress, on Tuesday CPI and Wednesday PPI inflation measures.
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  • Tsys futures were lower on Friday, following softer than expected in January Non-farm payrolls, we also saw 1Y forward inflation expectations in the UMichigan survey for February (to 4.3% from 3.3% in January), which saw tsys take another leg lower, however brief risk-off support arrived after Pres Trump headlines suggested reciprocal tariff's in the near term (rather vague - Trump is expected to discuss details at a press conference next Tuesday. TU closed  -04+ at 102-23⅛, while TY is trading -11 at 109-07+.
  • Weakness in the long-end was supported by block trades, including a large $1.25m/DV01 seller in the ultra-long bond futures.
  • Cash tsys curves bear-flattened, with yields closing +5 to +8bps across the curve. The 2yr closed +7.6bps at 4.289%, while teh 10yr closed +6.1bps at 4.495%. The 2s10s fell 1.5bps at 20.335 while the 2s20s -2bps at 45.5bps.
  • Nonfarm payrolls were softer than expected in January alone at 143k (cons 175k) but the latest two-month revision of +100k more than offset this (almost evenly split across Dec and Nov). As such, the 143k followed two even stronger than previously thought months with 307k in Dec and 261k in Nov.
  • Fed-dated OIS was pricing in approximately 35bp of rate cuts for the year vs. 42bp priced at Thursday close with the first full 25bp of easing moving out to the September policy meeting from July prior
  • In SOFR options, there was a standout trade that included a large play on no Fed rate cuts this year via a Sep25 put fly, paying a premium of around $8m over the US morning session
  • There is little on the calendar today, focus this week is on Powell's testimony to Congress, on Tuesday CPI and Wednesday PPI inflation measures.