Berkshire deal and RRR cut during otherwise quiet pre-NFP overnight….(Friday)

Markets are trading mixed today, equities a touch firmer after China cut RRR, although that has been highly telegraphed, commodities mixed, and global fixed income trading to higher yields. Volume and activity have been muted ahead of today’s NFP report. As of 8:20 AM ET, Treasuries are 3-5 bps higher in yield led by the belly, while US equity index futures are marginally better ahead of the NFP report and the cash open. The employment report in a few minutes and Powell’s speech in Zurich at 12:30 PM ET are the only events on today’s calendar.

It might have been even quieter last night had the Berkshire yen-denominated 6-part deal not priced. With regard to that, there was a block sale program in TY last night: 8 blocks of 1250 TYZ sold between 131-05 and 131-09+ from 8:13 PM ET to 9:27 ET, a sale of $100K of DV01, $800K total, in the 7y sector. There was also good paying in clips of $59K and $118K of DV01 in 30y swaps as well shortly after the block sales in 10s.

So, gonna go out on a little limb here and point out the Berkshire 6-part 4BN yen deal priced shortly after the London open (5s, 7s, 10s, 15s, 20s and 30s to facilitate their balance sheet liquidity in Asia). Looks like these may well have been done against those deals. All in all, just over $1.15MM of DV01 sold between TY (800K) and 30y swap paying (350K) so matches up fairly well. Be interesting to see if we get any unwinds during the US day or if this is all washed now.

Other than that, as expected, China cuts it RRR just after 5 AM ET, a move that had been fully priced in several days now. There was some Japanese real money selling of 30s early in the Asian session and then during European hours that was easily absorbed, the latter likely making room for some Berkshire paper. Mostly waiting on the NFP report.

So, this is interesting today. Market is flirting with a support level we had been looking for since mid-August: 130-09+ in TYU9 or 130-29 in TYZ9. Makes it a tough way to take the number. If there wasn’t event risk, you would buy here and see what happens, but do that at your own risk given the number in a few minutes. So for choice today in TYZ9, let’s call the range at 131-23 to 130-27; if we get a break to 130-16, I think you have to buy there (1.66% 10y equiv yield as well), but I would do my bidding in 5y sector on that backup. Support below 130-16 comes in at 130-10+ and 129-31. On the flipside, take out 131-23, and you make a quick run to fill single prints up to 131-31; above there and it’s 132-01, 132-07+, 132-09 (key, sell first test, long above there though), 132-13, 132-22. In general, fade any move more of roughly 5 bps from here as I don’t think this data is market moving right now.

Good luck out there and have a better weekend than I will have after this Bears’ debacle last night,