TREASURY WRAP: T-NOTE (U3) FUTURES SETTLE 28+ LOWER AT 113-27

Analysis details (20:59)

Treasuries bear-flattened after blowout jobs NFP additions ramped hike expectations beyond June and July. 2s +16bps at 4.501%, 3s +15.8bps at 4.145%, 5s +14.1bps at 3.842%, 7s +12.0bps at 3.778%, 10s +8.3bps at 3.691%, 20s +5.1bps at 4.034%, 30s +4.5bps at 3.879%.

INFLATION BREAKEVENS: 5yr BEI +3.8bps at 2.167%, 10yr BEI +2.1bps at 2.208%, 30yr BEI -0.6bps at 2.221%.

TOKYO/LONDON: Thin ranges ahead of payrolls after Thursday's bull-steepening, with T-Notes paring back a few ticks into the Friday APAC session, with some pressure out of AGBs after the minimum wage hike in Australia. The US Senate also passed the debt limit bill, which now goes to Biden's desk for passing. T-Notes hit support at 114-19+ at the Tokyo/London handover, with Bloomberg reports about China mulling stimulus in the property sector keeping further strength capped amid a bounce in commodities. 

NEW YORK: There were a few block steepeners at the NY handover seen ahead of the jobs data. But those were absorbed and the front-end started leading a sell-off into the data, which proved well timed after 339k jobs added headline number (exp. +190k). T-Notes dived further from 114-18+ to 114-08 in an immediate reaction, with the front end leading the sell off as the cash 2s10s spread inverted further from -75bps pre-data to -81bps. However, the move faded significantly five minutes after its release, with the spike in the unemployment rate and decline in hourly earnings and worked hours taking some of the hawkish sting out of the reading. It wasn't until an hour or so later that futures contracts began making fresh lows, with profit-taking after this week's rally and potentially as the NFP details were more finely scoured. Fed mouthpiece, WSJ's Timiraos, also noted "Friday’s jobs report does little to clarify the Federal Reserve’s debate over whether to hold rates steady this month. But it underscores the prospect that, if officials do so, they could favor raising rates later this summer", which provided some balanced perspective after the dovish overload in the wake of Fed's Harker and Jefferson in recent sessions. T-Notes ultimately troughed at 113-25 in the NY afternoon, with the 2s10s cash spread hitting -83bp, nearing the most inverted levels post-SVB of -84bps on May 30th. 

STIRS:

• SR3M3 -3bps at 94.728, U3 -9.5bps at 94.78, Z3 -16bps at 95.05, H4 -20.5bps at 95.49, M4 -23bps at 95.945, U4 -23bps at 96.33, Z4 -21bps at 96.61, H5 -19bps at 96.765, M5 -17.5bps at 96.83, M6 -13.5bps at 96.865.


• SOFR remains at elevated at 5.08% as of June 1st, while volumes rise to USD 1.627bln from 1.623bln, despite passing of month-end.


• NY Fed RRP op demand at USD 2.142tln (prev. 2.160tln) across 104 counterparties (prev. 102), fall accompanies USD 25bln cash drain from bill settlements.


• EFFR flat at 5.08%, volumes rise to USD 131bln from 118bln.


• US sold USD 15bln in 1-day CMB's at 5.060%, covered 4.11x; sold USD 50bln in 38-day CMBs at 5.250%, covered 3.40x.


• Treasury announced USD 50bln 38-Day CMBs on June 2nd, to settle on June 5th; USD 50bln 44-day CMBs on June 5th, settle on June 6th.

02 Jun 2023 - 20:59- Fixed IncomeData- Source: Newsquawk