MNI China Daily Summary: Wednesday, October 9

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US TSYS: Tsys Futures Off Earlier Highs, 10yr Holds Above 4% Ahead Of Auction

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Tsys futures are off earlier highs and now trade at session lows and back at NY closing levels, the moves look to have coincided with a bounce in equities following "CHINA MINISTRY OF FINANCE TO BRIEF ON FISCAL POLICY SATURDAY" - BBG. TU is trading +01⅛ at 103-14⅞, while TY is + 01+ at 112-16+.
  • Volumes are roughly in line with recent averages, while earlier we did see a 2s10s steepener Blocked, DV01 $385k.
  • Tsys curves have tbear-steepened, with yields +1.5bps to -0.5bps. The 2yr is -0.4bps at 3.955%, while the 10yr is +1.2bps at 4.024% and underperforms ahead of the 10yr auction later.
  • The Fed's Jefferson spoke earlier, his comments were largely in line with recent Fed speaker. He explained the Fed's recent 50bp rate cut as a move to support the labor market while inflation continues to ease toward the 2% target. He noted that economic growth remains solid, inflation is now at 2.2%, and the labor market has cooled slightly, with unemployment rising to 4.1%. Jefferson emphasized a data-driven approach to future rate decisions.
  • Traders are shifting their bets in the Tsys market, moving away from bullish positions as they expect a slower pace of Fed rate cuts following the strong September jobs report, long positions linked to the SOFR have sharply declined while new short positions are emerging ahead of key inflation data. The market is now pricing in 22bps of cuts at the November meeting, and 49bps by December, reflecting more cautious expectations for Fed policy easing.
  • Focus will turn to trhe 10y Auction and Sep FOMC minutes due out later today.
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  • Tsys futures are off earlier highs and now trade at session lows and back at NY closing levels, the moves look to have coincided with a bounce in equities following "CHINA MINISTRY OF FINANCE TO BRIEF ON FISCAL POLICY SATURDAY" - BBG. TU is trading +01⅛ at 103-14⅞, while TY is + 01+ at 112-16+.
  • Volumes are roughly in line with recent averages, while earlier we did see a 2s10s steepener Blocked, DV01 $385k.
  • Tsys curves have tbear-steepened, with yields +1.5bps to -0.5bps. The 2yr is -0.4bps at 3.955%, while the 10yr is +1.2bps at 4.024% and underperforms ahead of the 10yr auction later.
  • The Fed's Jefferson spoke earlier, his comments were largely in line with recent Fed speaker. He explained the Fed's recent 50bp rate cut as a move to support the labor market while inflation continues to ease toward the 2% target. He noted that economic growth remains solid, inflation is now at 2.2%, and the labor market has cooled slightly, with unemployment rising to 4.1%. Jefferson emphasized a data-driven approach to future rate decisions.
  • Traders are shifting their bets in the Tsys market, moving away from bullish positions as they expect a slower pace of Fed rate cuts following the strong September jobs report, long positions linked to the SOFR have sharply declined while new short positions are emerging ahead of key inflation data. The market is now pricing in 22bps of cuts at the November meeting, and 49bps by December, reflecting more cautious expectations for Fed policy easing.
  • Focus will turn to trhe 10y Auction and Sep FOMC minutes due out later today.