US 10YR FUTURE TECHS: (H6) Trend Structure Remains Bearish
- RES 4: 112-31 High Dec 18 and key short-term resistance
- RES 3: 112-22 High Jan 7
- RES 2: 112-07 50-day EMA
- RES 1: 112-02 High Feb 02
- PRICE: 111-17+ @ 11:19 GMT Feb 04
- SUP 1: 111-09 Low Jan 20 and the bear trigger
- SUP 2: 111-00 Round number support
- SUP 3: 110-30+ 1.618 proj of the Oct 17 - Nov 5 - 25 price swing
- SUP 4: 110-22+ 1.764 proj of the Oct 17 - Nov 5 - 25 price swing
Treasuries continue to trade below Monday’s high and a bearish theme remains intact. Resistance to watch is 112-07, the 50-day EMA. A clear break of the 50-day average is required to signal scope for a stronger recovery. Until then, gains are considered corrective and for bears, sights are on key support at 111-09, the Jan 20 low. Clearance of this level would confirm a resumption of the downtrend.
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LOOK AHEAD: Monday Data Calendar: ISM Manufacturing, Tsy Bill Auctions
- US Data/Speaker Calendar (prior, estimate). All times ET
- 1/5 1000 ISM Mfg (48.2,48.4), Prices Paid (58.5, 58.7)
- 1/5 1130 US Tsy $86B 13W, $77B 26W bill auctions
- Source: Bloomberg Finance L.P. / MNI
US TSY FUTURES: Short Setting Across The Curve On Friday
OI data points to net short setting across the curve on Friday, with the most pronounced moves coming in TU, TY, UXY & US futures.
- The curve saw over $10mln DV01 of fresh net short exposure added.
| 02-Jan-26 | 31-Dec-26 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,589,831 | 4,530,950 | +58,881 | +2,280,913 |
FV | 6,697,936 | 6,696,715 | +1,221 | +53,482 |
TY | 5,498,255 | 5,461,347 | +36,908 | +2,463,029 |
UXY | 2,573,262 | 2,543,105 | +30,157 | +2,716,584 |
US | 1,871,803 | 1,853,697 | +18,106 | +2,504,451 |
WN | 2,095,929 | 2,093,461 | +2,468 | +451,566 |
|
| Total | +147,741 | +10,470,025 |
SWAPS: Long End EUR Swap Spreads Consolidate Recent Pullback, Dutch Impact Eyed
Long-dated German and EUR swap spreads are little changed on the day, holding the narrowing seen in recent sessions (German 30-Year spread is ~3.5bp off the Dec high).
- EUR550-600bln of Dutch pension fund assets transitioned to a defined contribution system from a defined benefit system on 1 January, which poses well-documented structural pay-side risks to long dated swaps in Europe.
- Uncertainty around the exact timing of the related flows (which is set to be dynamic as opposed to all at once, in order to facilitate smoother market digestion), coupled with already meaningful moves in swap spreads (German 30-Year swap spreads are ~30bp off ’25 lows), may have provided some downward pressure for spreads in recent sessions.
- Commerzbank are wary of chasing widening in the very immediate term, noting that the recent “swap spread cheapening seems to suggest that the richening during December has made room for the initial long-end flows from Dutch pension funds”.
