US TSYS
- Tsys futures closed slightly higher on Tuesday, there was initial weakness in tsys following weak JOLTS Jobs data, however we recovered following the strong 7Y note auction.
- The initial move lower followed JOLTS job openings with possible hurricane impact, whilst quit rates on balance point to a still low level having declined after a reasonable upward revision, job openings surprised lower with 7443k (cons 8000k) in September after a downward revised 7861k (initial 8040k) in Aug.
- The auction stopped 2bp through with 4.215% high yield vs. WI of 4.235%, the 7.5% primary dealer award was lowest in more than a year as indirect award increased to 72%, direct award to 20.6%; also the 2.74 bid-to-cover ratio was among highest on record compares with 2.54 average for previous six auctions at the tenor
- In tsys options there was demand during US morning for volatility hedging, with stand-out flows including a $5m premium strangle position via TY Week 1 options. The BofA move Index has now reached it's highest in 12 month, as traders expected volatility to increase heading into the election.
- Cash tsys curve steepened slightly with yields closing 2.5-4.5bps lower, the 10yr underperformed. The 2yr closed -4.3bps at 4.098%, while the 10yr closed -2.8bps at 4.254%. The 2s10s closed +1.5bps at 15.375.
- Focus turns to ADP employment data, GDP and Pending Home Sales.
Chart. MOVE Index vs 10yr Yield
223 words