FED: Post-FOMC Rhetoric Underlines New Hike Tilt

Wednesday's US rates/bond options flow included:

• SFRM6 96.3125/96.25 put spread bought for 0.75 in 5k
• SFRN6 96.50/96.3125 put spread bought for 16.5 in 10k
• SFRU6 96.3125/96.375/96.4375/96.625c condor, bought for 1 in 4k total (ref 96.245)
• SFRZ6 95.75p, bought for 10.5 in 10k total (ref 96.16)
• SFRZ6 96.43/96.31ps, sold at 9 in 10k total
• 5IK6 106.75 puts saw paper pay 0-03 on ~6.7K. These expire on Friday

• VBYM261 110.25 calls paper paid 0-05 on 9K. These expire on Monday

   

Treasuries traded mixed Wednesday as the latest US-Iran developments were digested.

• After Tuesday's late gains in TY futures maintained the modest momentum overnight, volatility picked up in morning trade punctuated by Iranian media's claim of a memorandum of understanding received by Tehran that included a path to reopening the Strait of Hormuz. That triggered a lurch lower in crude prices (WTI briefly below $88/bbl) and a session high for TYs (Sept hit a 2-week high 109-28+).
• This was later dispelled after the Trump administration called the report a ‘complete fabrication', and the move partially reversed.
• But the White House continued to portray an overall optimistic view on talks, and crude ultimately held on to most losses (down over 5% for the session). Treasuries look to close with a twist flattening move, as short end /belly yields edged a little higher.
• Latest levels: the 2-Yr yield is up 0.1bps at 4.0328%, 5-Yr is up 0.6bps at 4.1774%, 10-Yr is down 0.4bps at 4.4807%, and 30-Yr is down 0.6bps at 5.012%. Sep 10-Yr futures (TY) up 1.5/32  at 109-20 (L: 109-18/ H: 109-28+; note September OI and volumes exceeded those of the June contract today).
• For a second consecutive session, a nominal coupon auction closed very close to the when-issued yield and brought little discernable market reaction; the 5Y's 0.1bp tail with middling stats (but high indirects) followed Tuesday's on-the-screws 2Y. Thursday concludes the month of auctions with 7Y Note.
• For yet another session, data was mixed. ADP weekly employment rose a solid average 35.75k in the 4 weeks to May 9, and the Richmond Fed's manufacturing survey was the strongest in years, but the non-manufacturing gauge there and in the Dallas Fed region were comparatively less impressive in the details.
• The schedule picks up slightly over the next 24 hours, with appearances by Fed's Cook and, later, Jefferson; Thursday's data schedule is packed, including the latest monthly PCE data along with GDP, durable goods, and jobless claims. 

• RES 4: 0.7374 Top of a bull channel drawn from the Apr 9 ‘25 low 
• RES 3: 0.7325 1.500 proj of the Apr 29 - May 1 - May 5 price swing  
• RES 2: 0.7223/78 High May 15 / 6 and the bull trigger
• RES 1: 0.7184 High May 18
• PRICE: 0.7138 @ 17:26 BST May 27
• SUP 1: 0.7080 Low May 19
• SUP 2: 0.7056 50.0% retracement of the Mar 30 - May 6 bull leg  
• SUP 3: 0.6986 Low Apr 13 
• SUP 4: 0.6899 Low Apr 7

AUDUSD is in consolidation mode. Recent weakness still appears corrective. Note that MA studies are in a bull-mode position and this set-up continues to highlight a dominant uptrend. However, support at the 50-day EMA, currently at 0.7119, has been pierced. A clear break of this average would signal scope for a deeper retracement and expose 0.7056, a Fibonacci retracement. Key resistance and the bull trigger is unchanged at 0.7278, the May 6 high.