CHINA RATES: MNI: China Repo Rates Diverge On Monday

Tsy futures gapped lower after broadly higher than expected Change in Nonfarm Payrolls of +353k vs 185k est (prior up-revised to 333k from 216k), Private Payrolls surge to +317k vs. 170k est. Unemployment Rate 3.7% vs. 3.8% est while Labor Force Participation Rate near steady at 62.5% vs. 62.6% est.

• Futures continued to extend lows after little initial react to UofM and Factory/Durables Order data
  • U. of Mich. Sentiment (79.0 vs 78.9 est)
  • U. of Mich. Current Conditions (81.9 vs. 83.5 est)
  • U. of Mich. Expectations (77.1 vs. 76.0 est)
  • U. of Mich. 1 Yr Inflation (2.9% vs. 2.9% est), 5-10 Yr (2.9% vs. 2.8% est)
• Mar'24 10Y futures currently trading -1-06.5 at 111-22. Technical support at 111-16/110-26 Low Feb 2 / Low Jan 19 and bear trigger. Curves remain flatter but well off lows: 2s10s -2.206 at -34.839 (-40.198 low), while 10Y yield remained above 4% at 4.0237% (+.1435) after starting the day around 3.8648%.
• Factory Orders in-line w/ 0.2% vs. est, Ex Trans (0.4% vs. 0.2% vs. est)
• Durable Goods Orders in line w/ 0.0% vs. est, ex Trans (0.5% vs. 0.6% vs. est)
• SOFR futures gapped lower (SFRH4-SFRZ4 -0.080-0.210) while projected rate cut chances retreated: March 2024 chance of 25bp rate cut currently -22.2% vs. -38.7% pre-data w/ cumulative of -5.6bp at 5.263%, May 2024 at -70.6% vs. -90.8% w/ cumulative -23.2bp at 5.087%, while June 2024 at retreated to -87.9% vs. 105% w/ cumulative -45.2bp at 4.867%. Fed terminal at 5.3175% in Feb'24.

SOFR and Treasury option remained mixed on heavy volume Friday, accounts adjusting positions after an unexpected surge in January jobs: +353k vs 185k est (prior up-revised to 333k from 216k), Private Payrolls surge to +317k vs. 170k est. SOFR futures gapped lower (SFRH4-SFRZ4 -0.080-0.210) while projected rate cut chances retreated: March 2024 chance of 25bp rate cut currently -22.2% vs. -38.7% pre-data w/ cumulative of -5.6bp at 5.263%, May 2024 at -70.6% vs. -90.8% w/ cumulative -23.2bp at 5.087%, while June 2024 at retreated to -87.9% vs. 105% w/ cumulative -45.2bp at 4.867%. Fed terminal at 5.3175% in Feb'24. Salient trade includes:

• SOFR Options:
  • Block, 20,000 SFRU4 95.31/95.43 call spds, 6.5 ref 95.59
  • Block, 10,000 SFRU4 94.93/95.37/95.43/95.68 broken put condors, 1.0 net - belly over
  • Block, 10,000 SFRM4 95.31/95.43/95.56/95.68 call condors, 1.25
  • Block, 5,000 SFRH4 95.50 calls, 1.25 ref 94.795/0.09%
  • Block, 5,000 SFRM4 95.37/96.00 call spds, 8.0 ref 95.20
  • Block, 5,000 SFRH4 95.00/95.06/95.12 call flys, 0.25 ref 94.795
  • +9,000 SFRH4 95.00 calls, 2.5 ref 94.81/0.10%
  • Block, 20,000 SFRH4 94.87/95.00/95.12/95.25 call condors, 0.75
• Treasury Options:
  • +10,000 FVH4 106 puts, 2.5
  • 10,000 TYH4 111.5 puts, 43.0, total volume on nay over 98k
  • Block, 10,500 TYM4 111 puts, 105 vs. 111-19/0.16%
  • 8,400 TYH4 112.5/113.5 1x2 call spds, 2 ref 111-20.5
  • -2,900 TYM4 112 straddles, 318 ref 112-08.5
  • 6,000 FVH4/wk2 FV 108.5 straddle spds
  • 1,800 FVH4 106.75/107.5/108.25 2x3x1 put flys ref 107-31.5
  • 2,300 TYH4 109.5/110.5/111.5 put flys, 10 ref 111-27.5