US TSYS: TYM6 Off Lows After Iran Headline Questioned Having Probed Support
Treasuries have extended yesterday’s sell-off, with the front-end pushing back towards Tuesday’s recent lows and the longer end through those lows. Markets are particularly attentive to signs of off-ramps in the Middle East whilst today also sees various labor updates including the easy to miss from calendars Revelio Labs release plus import prices.
- Treasuries and equities rallied off lows on an earlier Sky News Arabia headline that Iran “is ready to abandon its nuclear program on condition that the United States presents a satisfactory alternative offer”, before paring the move somewhat with a lack of corroboration elsewhere.
- Cash yields are 1.5-2.5bp higher on the day, led by the front end.
- TYM6 trades at 112-18 (-08) on another solid overnight for volumes at a cumulative 575k.
- It’s off an earlier low of 112-15+ in a move that probed support at 112-16+ (50-day EMA) after which lies 112-11 (61.8% retrace of Jan 20 – Mar 2 bull leg).
- Yield-based levels to note are a 10Y yield of 4.15% equating to 112-11+ and 4.20% to 112-01, with the 10Y yield currently at 4.119% off an earlier high of 4.129%.
- Data: Challenger job cuts Feb (0730ET), Weekly jobless claims (0830ET), ULCs/Productivity Q4 prelim (0830ET), Revelio Labs labor statistics Feb (0830ET), Chicago Fed u/e rate nowcast Feb final (0830ET), Import/Export prices Jan (0830ET)
- Fedspeak: Bowman moderated discussion (1315ET), Goolsbee (1900ET)
- Bill issuance: US Tsy $105B 4W & $95B 8W bill auctions (1130ET)
- Politics: Trump receives intelligence briefing (1100ET), Trump participates in visit of 2025 MLS Champions (1600ET), Trump in policy meeting (1730ET)
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SOFR: Short Setting Dominates In Futures On Monday
OI data points to net short setting dominating through the blues on Monday, with only 3 instances of net long cover seen across the front 4 contracts. Firmer-than-expected ISM manufacturing data drove much of the hawkish shift in pricing.
| 02-Feb-26 | 30-Jan-26 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ5 | 1,403,701 | 1,362,255 | +41,446 | Whites | +125,769 |
SFRH6 | 1,438,688 | 1,424,858 | +13,830 | Reds | +50,480 |
SFRM6 | 1,456,020 | 1,416,993 | +39,027 | Greens | +3,945 |
SFRU6 | 1,482,557 | 1,451,091 | +31,466 | Blues | +10,785 |
SFRZ6 | 1,418,518 | 1,410,227 | +8,291 |
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SFRH7 | 1,060,600 | 1,045,823 | +14,777 |
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SFRM7 | 871,516 | 857,481 | +14,035 |
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SFRU7 | 841,233 | 827,856 | +13,377 |
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SFRZ7 | 860,819 | 861,383 | -564 |
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SFRH8 | 522,731 | 516,715 | +6,016 |
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SFRM8 | 440,425 | 437,241 | +3,184 |
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SFRU8 | 396,491 | 401,182 | -4,691 |
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SFRZ8 | 395,088 | 382,604 | +12,484 |
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SFRH9 | 216,524 | 220,934 | -4,410 |
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SFRM9 | 209,590 | 208,231 | +1,359 |
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SFRU9 | 172,574 | 171,222 | +1,352 |
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USD: Danish Pension Funds and Insurance Co's Increased USD Hedge Ratio In Dec
Danish pension fund and insurance companies increased their USD hedge ratio to 72.2% in December (vs 70.7% in November), according to central bank data released yesterday. The hedge ratio on USD exposure is thus just under the 2015-2025 average of 72.5%. It will be interesting to see how hedge ratios evolve in January, given the increase in tensions between the US and Denmark/the EU over Greenland at the start of the year. Hedge ratios were as high as 80% in 2015/16 (albeit on a smaller stock of assets), suggesting there is scope for further increases from current levels in the medium-term. This would play into analysts’ bearish USD views for 2026.
- Danish pension funds and insurance companies hold DKK1.726trln of USD assets - around USD273bln at current spot levels.
- There was a sharp increase in hedge ratios in H1 2025 from ~62% to ~74% as a result of the acute US tariff/trade policy uncertainty, which culminated in Liberation Day.
- In December, there were DKK880bln USD assets hedged to EUR (70.5% of total hedged assets vs 71.6% in November) and DKK346bln hedged to DKK (27.7% of total, vs 26.8% prior).
- Danmark’s National Bank noted that the pension and insurance sector returned DKK225bln in 2025, with currency hedges contributing DKK87bln.
USD: DXY Price Signal Summary - Monitoring Key Trendline Support
USD weakness in January resulted in the breach of a key trendline support in the USD Index (DXY). The recovery over the past few days highlights an interesting technical feature around this trendline that will be a key focus this month.
- The trendline is drawn from the May 2011 low (using a monthly frequency).
- The value of the line for February is 97.53.
- January's monthly close below the line marked an important USD bearish signal.
- However, the recovery so far this month does highlight the fact that the recent break may turn out to be a false one.
- A strong bullish February and a monthly close above the line would suggest a potential false break in January - and highlight a possible medium-term bullish theme.
- Important short-term resistance levels to watch are:
- 97.84 - the 20-day EMA.
- 98.37 - the 50-day EMA and a key resistance.
- A clear break of the 50-day average would be an important short-term bullish development.
- Key support is at 95.55, the January low.
