Okay, so come in late and see what happens? We were supposed to be all bulled up for extensions and rebalancing at month end. Instead we had our largest break in weeks on the Chicago open. As of 9:30 AM ET, equities opened marginally lower with Treasury yields up 2-4.5 bps from their 3 PM marks on Tuesday in a bear steepener (yes, bear steepener!!!). What gives???

*Hearing there was programmatic selling in TY and FV contracts on the pit open. Volume in futures dwarfed cash at that time, which yells CTA/program guys selling. Confirmed in the last few minutes. Also, at virtually the exact same time, saw huge volumes go through in RXH (bund futures), often indicative of program selling across currencies, and even more interesting that bunds had managed to . This was on the heels of very solid results for a bund issue today, so screams of collusion–or at least program. Check.

*Several drive by deals then materialized in USD after 9 AM ET (so hedging would have been before then). It wasn’t the size of the deals but the number that caught the market wrong-footed when combined with the CTA selling at a time fast money was looking to ride the buy wave; fast money stopped out below 122-04 in TYH.

Go figure. 122-02 was just tagged in TYH, the objective from yesterday. See if we hold in here, otherwise back up to 121-29+/30+ level (2.70% equiv in cash 10s). If by some chance we can break through there we might actually be able to make a run at 2.75% (121-17 support). If we get back above 122-08, the day will be over.

One more time for review, USTs extend .12 years this month, well above the monthly average, although only slightly above the average extension for March (.11 years). The rebalancing gets a lot of play these days (I am always so skeptical, but what the heck), and that shows somewhere between $25BN and $35BN of cash needing to be moved from equities (+3.4% for the month) to fixed income (aggregate up .4% thus far this month). Asian real money bought 30s last night in respectable size, but was hampered by CME being down for entire Tokyo morning. There is still more to buy there, and certainly some in the US. But we’ll see. Maybe, just maybe, we are getting ready to trade (remember I wrote that Monday morning, only to quit the idea yesterday???).

Good luck on this hump day,

mjc