US TSYS: A Touch Cheaper
Tsys have cheapened a touch, potentially on the back of a BBG sources piece which suggested that the U.S. Tsy’s move to block Russia US$-debt payment via U.S. banks doesn’t necessarily mean default, although that is listed as one of the potential aims of the move, with other options available to Russia including a drain of US$ reserves held in Russia or spending freshly acquired revenue. TYM2 is -0-00+ at 122-02+, 0-01 off lows, while the long end continues to lead the cheapening, with benchmark yields little changed to 2bp higher on the day.
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OPTIONS: US Treasury/Eurodollar Option Roundup
Overall option volumes rather muted on the day -- even as lead quarterly extended new low for the year (EDH2 -0.130 to 99.15) -- perhaps a little too aggressively pricing in chance of 50bp liftoff at March 16 FOMC.
- Carry-over from Thu and overnight trade in lead quarterly Mar Eurodlr futures/3M LIBOR jump (+0.02700 to 0.61014% (+0.08714/wk) as traders look for extension of FRA/OIS widening to June -- possible link to increased funding concerns tied to Russia risk exposure for global banks.
- Meanwhile, Chicago Fed Pres Evans said on CNBC this morning -- the strong jobs data "DOESN'T REALLY CHANGE ANYTHING THAT FED CHAIR POWELL IS POSITIONING FOR" -- where Powell said 25bp hike appeared appropriate at Thu's Senate testimony. Fed enters media blackout at midnight Friday through March 17, day after the FOMC announcement.
- Salient Eurodollar option trade included scale buyer 10,000 Green Jun 97.50/97.75 put spds and over20,000 Mar 99.06 puts, 4.0.
- Treasury options saw scale buyer over 32,000 TYJ 126 puts on wide range of prices: 12-24.
USDCAD TECHS: Bearish Threat Remains Present
- RES 4: 1.2964 High Dec 20 and a key resistance
- RES 3: 1.2924 High Dec 22
- RES 2: 1.2878 High Feb 24 and a key near-term resistance
- RES 1: 1.2792 High Mar 4
- PRICE: 1.2734 @ 17:42 GMT Mar 4
- SUP 1: 1.2587 Low Mar 3
- SUP 2: 1.2552 76.4% retracement of the Jan 19 - Feb 24 rally
- SUP 3: 1.2499 Low Jan 21
- SUP 4: 1.2451 LowJan 19 and a key support
USDCAD traded lower Thursday but recovered well from the week’s low of 1.2587. The move lower marks an extension of the recent reversal from 1.2878, Feb 24 high and signals potential for a deeper retracement of the recent Jan 19 - Feb 24 upleg. The pair has breached 61.8% of this bull cycle and this has opened 1.2552, the 76.4% retracement. Initial resistance is seen at Friday’s 1.2792 high.
US TSYS: Russia War Keeps Mkts on Edge, Into Weekend; Strong Jobs Data
After initial two-way trade US Tsy futures broke narrow upside range after Feb employment data showed job gains +678k vs. +415k est, AHE declines MoM from 0.61% to 0.03.
- Overall data appears "mildly less inflationary, at least from the supply side" one desk commented. Decent data but markets remained on edge as Russia war in Ukraine entered day nine.
- Equities still trading weaker after FI close, SPX eminis off late morning lows (ESH2 4282.50L) to near middle of the range at 4307.5 at the moment -- still above first technical support of 4227.50/4101.75 Low Feb 25 / Low Feb 24 and a bear trigger. Markets remain on edge going into the weekend.
- Late session risk aversion: Tsys turn higher, additional selling in stocks after headlines noted access to Twitter and Facebook blocked in Russia -- social media outlets a non-state media source of news for Russians. WTI spiked to session highs of $115.36 in late trade as WH spokesperson said banning Russia oil imports had been discussed.
- While FI markets traded strong all day -- short end remained under heavy pressure: lead quarterly Eurodlr futures made new low for yr at 99.15 (-0.140), well past prior low of 99.205 from Feb 10 as 50bp liftoff pricing gains momentum -- 25bp hike on March 16 a foregone conclusion after Fed Chairman Powell sees as appropriate (Thu's Senate testimony).
- The 2-Yr yield is down 4bps at 1.4899%, 5-Yr is down 9.5bps at 1.6372%, 10-Yr is down 11bps at 1.7307%, and 30-Yr is down 6.7bps at 2.1533%.
