BUNDS: Day ahead

Bonds lead the rebound off post jobs data lows, rising steadily higher (read: narrow upward path) through the NY close. Gist: continued sale unwind/buy support operating under the premise this morning's higher than expected Nov jobs gain of +263k (+200k est) not high enough to seriously dampen expectations of a step-down to 50bp hike at Dec 14 FOMC.

• Fed enters policy blackout at midnight tonight (Fed speakers Barkin and Evans offered no rebuttal on jobs). Focus will be on next week Fri Nov PPI (final demand YoY 7.2% est vs. 8.0% prior) and CPI on Dec 13, the day ahead the final FOMC annc of 2022.
• Very short end bid EDZ2 +2.75 at 95.1625, Fed terminal at 4.92% in May'Jun'23, while 2023 still weaker as prospect for return of 75bp hike remains slightly elevated. In-line, yield curves flatter, but off early wk inverted lows, 2s10s currently -6.564 at -79.275 (-79.513 low).
• Fed funds implied hike for Dec'22 slips to 51.2bp, Feb'23 cumulative has climbed to 87.6bp (84.8bp earlier) to 4.711%, terminal bounces back to 4.915% in May/Jun'23 (4.835% pre-NFP).

The number of varied trades made up for modest overall volumes Friday. two-way flow as underlying futures steadily reversed post-NFP sell-off as 50bp hike in Dec still priced in (curves flatter as prospect of slower hikes in 2023 cooled, however).

• Early trade summary carried over into the second half: better upside call hedging in SOFR options ahead key employment data while Treasury options saw better 10Y put interest. SOFR upside insurance call buying continued through midday while Treasury option focus on puts.
• SOFR Options:
  • 10,100 SFRZ2 95.187 puts, cab ref 95.4725
  • Block, 4,000 SFRG3 95.18/95.37 call spds 5.5 ref 95.085
  • Block, 5,000 short Mar 97.37/97.62/97.75 broken call flys, 4.0 net ref 96.965
  • 6,700 short Jan 95.87 puts, 11.5 ref 96.19
  • Block, 1,845 short Dec 95.87/96.12 call spds 6.5 vs. 95.755/0.20%
  • Block, 3,500 SFRM3 94.12/94.50/95.12/95.50 call condors, 17.0 ref 95.205
  • Block, 1,250 short Apr 96.5/97.50 call spds 12.5 over Blue Apr 97.5 calls
  • Block, 2,641 SFRZ 95.5/95.56 call spds .75 over SFRZ 95.31/95.37 put spds
  • 2,000 short Mar 96.75/97.12/97.37 call flys ref 96.155
  • Block, 1,250 SFRZ2 95.31/95.43/95.56 call flys, 12.0 ref 95.49
  • Block, 5,000 SFRM3 95.00/95.25 call spds, 12.5 ref 95.17-.175
  • Block, 2,000 SFRG3 95.31/95.37 call spds, 1.5 ref 95.155
• Eurodollar Options:
  • 5,000 Mar 99.50/99.75 put spds
  • 10,000 Dec 96.25/96.50 put spds
  • 5,500 Mar 97.87/98.12 put spds
  • 2,000 Dec 94.56/94.81/95.12/95.37 broken put condors ref 95.145
• Treasury Options:
  • 5,000 TYF 108 puts, 1 ref 114-23
  • 3,000 TYF 115.5 calls, 38 ref 114-24.5
  • 1,000 TYG3 111.5/113 3x2 put spds, 19
  • 2,000 TYF3 112.25/112.75 put spds, 6
  • 4,000 TYF 115/116.5 call spds, 31
  • 14,100 TYF 113.5 puts, 31-32 ref 114-20 to -19.5
  • 2,800 TYG3 108 puts, ref 114-20.5 to -21
  • 1,800 TYH3 113/114.5/116/117 broken call condor
  • 2,000 TYF 115 calls, 45

• RES 3: 152.26 - High Dec 7 / 21 2021
• RES 2: 151.13 - High Mar 3
• RES 1: 149.75/150.81 - High Nov 11 / High Aug 5
• PRICE: 148.96 @ 20:08 GMT Dec 2
• SUP 1: 148.24/147.38 - Low Nov 4 / Low Oct 21
• SUP 2: 147.07 - Low Jun 20
• SUP 3: 145.05 - Low Jun 16 and a key support

JGB futures continue to trade below 149.75, the Nov 11 high. A resumption of weakness would expose support at 148.24, the Nov 4 low. If this level is cleared, scope would be seen for a move towards 147.38, the Oct 21 low and 147.07, the Jun 20 low (cont). For bulls, key resistance has been defined at 150.81, the Aug 5 high where a break is required to suggest a stronger medium-term reversal.