Unwinding Some Of Yesterday's Late Rally, NFPs, Fedspeak & Geopolitics Eyed

Tsys are off Thursday’s late highs. Oil is also off highs and e-minis are off lows, pointing to a modest unwind of some geopolitical risk premium ahead of today’s NFP release.

• TYM4 -0-06+ at 109-29+ (109-29 to 110-05+ range), with volume running at a slightly above average ~285K.
• Initial support is seen at the Apr 3 low (109-09+), with the technical downtrend still intact.
• Cash Tsy yields are 1.0-2.5bp higher across the curve, 10s lead the sell off.
• The labor market report dominates the macro calendar ahead of the weekend. Our full preview of that event can be found here.
• FOMC-dated OIS shows ~71bp of ’24 cuts vs. extremes of ~65bp earlier this week.
• Some of this week’s Fed rhetoric gave a distinctly dovish feel before the geopolitical risk impacted pricing late Thursday.
• Sensitivity to a relatively small miss in the weekly initial jobless claims data, coupled with outright yield/FOMC-dated OIS levels and recent Fedspeak, suggests that the market is likely to see a more meaningful reaction to a soft release than it would in the case of a firm report.
• On that note, our DC team’s latest piece stressed that the Fed won't hesitate to ease if employment falters.
• Elsewhere, another raft of Fedspeak is also due today.
• Israeli-Iran tension will be eyed after yesterday’s headline flow.