Good morning. Here’s a(nother) short comment (and a visual) from a dealer describing (general lack OF UST) overnight activity …
…Treasuries are aggressively mixed and turnover has been well below average overnight ahead of this afternoon's key Fed event. DXY is little changed (-0.05%) while front WTI futures are lower (-1.5%). Asian stocks were mixed (China shares weaker after disappointing housing/consumption/investment data), EU and UK share markets are mixed and ES futures are showing little changed here at 6:50am. Our overnight US rates flows actually saw more activity during Asian hours than the last two days (low bar) with 'good' real$ selling seen in intermediates and the long-end. During London's AM hours the Gilt market underperformed after a big CPI print there with swap spreads tightening in a catch-up move to EU sovereign spreads. Banks sold 5yrs while CB’s bought the 7y area. Overnight Treasury volume as of 6:55am was just ~50% of average with 30yrs (61%) seeing the highest relative turnover overnight.
This one shop continued, characterizing a good laugh at aggressively UNCH prices of USTs this morning with several visuals and these words and single visual peaked MY interest as it’s been ‘out there’ for a few days now. From the Morning Musings
Had a private chuckle after turning on the screens this morning and seeing US Treasuries sharply unchanged from last night's close with overnight Treasury dealing volumes running close to 60% of recently-falling averages. We knew days ago that this morning's Reveille would be a challenge where keeping it short and 'doing no harm' was probably the way to go ahead of the Fed this afternoon. In that spirit, we're going to do as we usually do and show you some pictures of the set-ups in a host of self-chosen US rates benchmarks. The hope is that some of this morning's attachments can frame the picture(s) where we will pick-up and chat about whatever the new narratives might be in Rates at the Bell- hopefully filling-in the frame a bit after Powell shuts off the mic this afternoon…
AND the descriptor OF 2y1y-4y1y OIS curve inversion
… Not exactly a core US rates benchmark but the recent inversion of this forward OIS curve is certainly notable and rare. Indeed, the last time this curve went inverted was ~ 2 1/2 yearsinto the Fed's last rate hike cycle. Could curves like this force the Fed to consider balance sheet reduction before rate hikes to avoid more curves from going inverted?
Happy Fed Day … stock mkt (10yy) playbook via DataTrek HERE. Off to the day job…