Okay, everybody wake up and pay attention…after all, it is NFP day, even though the FOA for today trades well under 4 bps and the TY straddle for today is at 3.5 bps! At 8 AM ET, Treasuries are roughly .5 bps higher across the curve, while equity index futures are small lower but that will all be nothing but noise after 8:30 AM ET.
Two blocks posted during London hours, the first taking us off the early highs made during the Asian session with a sale of 12,171 TYZ for 120-04+ at 3:06 AM ET ($925K in DV01), followed by a buy of 11,000 TYZ for 120-04 at 4:04 AM ET ($835K in DV01) that looks to be a cross-currency trade against a 5K lot sale in bunds at the same time.
FX is behaved for now, with EM currencies better bid against the greenback ahead of today’s data, while BTPs are trending wider as the day wears on, ahead of supply Monday (market prices higher volatility for that event right now than it does for today’s employment data). There was some small Japanese real money buying in 5s during Asia, with Asian real money lifting 10s and credit desk covering some exposure via 30s. But that small bid became a small offer in Europe after the first block sale in TY, and on the back of the better EM/risk sentiment.
Aside from the employment report today, we will also hear from Rosengren (who already spoke on CNBC and didn’t say anything new or very interesting) at 8:30 AM, Mester at 9 AM (both at Boston Fed Conference), and Kaplan at 12:45 PM ET in Dallas. That will be about it for this first Friday in September.
Obviously, 2.95% in cash 10s is an important level, but is still 7 bps from here. So if we are going to get a “power move” then 119-22 in TYZ becomes a key level to watch today. 3% would come in at roughly 119-09, but that seems a mile away. On the flip, 120-20 in TYZ is the key level for now (roughly 2.82% cash 10s). For choice today, will call the range in TYZ at 120-10 to 119-30, with almost zero conviction. If I were betting your money, I would look for a pullback to 119-30 and buy against there, and I would add some FVU calls later in the day. If I am using my money, I’ll just choose to watch you trade today and see how you do, although I might have to add some gamma via those FVU calls later….(I think that is how the market is positioned: as close to home as possible).
That’s about it for now. Good luck today and have a good weeknd. Wish I felt a little more conviction in saying should be an interesting one….