USD strength
September 5, 2023
–Brief rally in interest rate contracts post-NFP quickly fizzled, with TYZ posting an outside day and closing near the low. No relief during yesterday’s holiday session and futures are lower yet this morning. TYZ settled 110-185 on Friday, down 14.5/32 and currently print 110-085.
–It’s a light news week in the US, with Factory Orders today, Service ISM and Beige Book Wednesday. Not likely to be much drama associated with the Sept 20 FOMC as the market indicates small odds of a hike. FFV3 settled 9465.5 or 5.345% against a current Fed Effective rate of 5.33.
–China’s fits and starts to stabilize continued deterioration in the property sector seem to be resolving in a weaker currency, with $/cny now above 7.30, nearing last year’s high (weakest level in the yuan). $/yen also at this year’s high, over 147. US stock index futures responding with marginal weakness.
–Front end of the US curve was well supported on Friday even as longer maturities sold off. Two-yr yield up just half a bp to 4.864%. SFRZ3 settled 9460.5, +0.5 and SFRH4 9479.5, -0.5. Heavy buying of call spreads on the latter. SFRH4 9500/9525cs 5 paid for 15k. 9550/9600/9650c fly 1.5 to 1.75 paid for 15k.
