CROSS ASSET: Tsys Sell Off, USD Bid, Some Look To Niche Labor Market Readings
Oct-02 13:19
The recent pullback in bonds was led by Tsys, while the greenback firmed in FX trade.
- While there hasn’t been much in the way of meaningful headline flow on the wires, we suggest that some could be looking to lower tier/proxy data covering the U.S. labor market.
- While the national level jobless claims data is not available, some states have released their readings on an ad-hoc basis, and markets may be responding here.
- Elsewhere, Revelio’s gauge points to a firmer-than-expected NFP release of +60.2K (the BBG survey median for the official NFP release, which is set to be delayed by the government shutdown, sat at +52K).
- FOMC-dated OIS removes 1bp of easing through year-end, showing ~46bp of cuts through December.
- A reminder that yesterday’s ADP employment release biased pricing in a dovish direction, which, when coupled with the lack of visibility when it comes to official labor market data, may be heightening the impact of the move/reaction to unofficial/proxy data.
- In FX, yield differential swings mean that USD/JPY failed an attempted break of the week-to-date low - stalling the broader USD pullback for now. GBP/USD through to new daily lows, but yesterday's 1.3435 base is intact for now.
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US TSY FUTURES: BLOCK: Dec'25 10Y Buy
Sep-02 13:16
- +10,000 TYZ5 112-01, buy through 112-00.5 post time offer at 0859:36ET, DV01 $654,000.
- The 10Y contract has finally rebounded after several Block buys this morning, TYZ5 trades 112-04 last (-12)
BTP: Large Calendar spreads go through
Sep-02 13:00
- Noted on the Eurex Roll, that the BTP was behind the pace, now some 22.72k spread trades in a 3 minutes Window.
- The BTP spread has been lifted in the past 30 minutes, and has moved from a 89 low to a 92 high at the time of typing.
FOREX: USDJPY Extends Intra-Day Rally to 1.15%
Sep-02 12:55
- A combination of drivers have propelled USDJPY to a fresh one month high of 148.93 on Tuesday. On the topside, 149.12 is the next resistance (61.8% of the Aug 1 - 14 bear leg). However, should momentum continue to gather speed, investors will look to another retracement level at 149.81, followed by 150.92, the August 01 high and a key resistance.
- The initial impetus for the squeeze higher came from BOJ Deputy Governor Himino, who gave no guidance on the timing or pace of potential rate hikes, providing little confidence to yen longs.
- The dynamic of widening yield differentials underpinning the USDJPY rally was then exacerbated by a relief rally for JGB futures following a very solid 10-year auction (highest bid-to-cover since 2023) and the subsequent contrasting pressure on core fixed income that has seen US 10-year yields extend their rise to 7bp on the day.
- Political uncertainty also played its part in the yen sell-off, as a flurry of resignations from senior leadership positions within the governing LDP have followed an internal party meeting. It remains to be seen whether this proves a sufficient sacrifice to keep Japanese PM Ishiba in office.
