Another 40k bought in TYF 122/120.5 ps covered 124-08…settled 10 ref TYH7 123.315.  Continued curve steepener trades in dollars, primarily focused on reds to blues (2nd to 4th year contracts), on both options and outright futures (for example +15k EDZ7/EDZ9 futures spread for 79.5 early, it settled 81.5).  All euro$ one-year calendar spreads made new highs, with the peak now March’17/March’18 at 48 bps.  The market is feeling more comfortable with the idea that the Fed could squeeze two hikes into a one-year time frame.

–Volume favors the downticks.  Implied volatility is bid in the direction of trend, which is down in this case. Recently there have been some wingy put buys, for example yesterday April TY puts opened up, trading 7k contracts of 94, 95, and 96 puts for Cab-7 (which is premium of $7 each as opposed to normal 1/64th tick size of $15.625).  Given that the contract is based off 6% notional, any strike below par is over 6% yield.

–Oil soared the past few days and while slightly lower this morning it’s still near $51/bbl.

–Today’s NFP is expected 180k with a rate of 4.8 to 4.9%.  On a bullish number, expect an overhang of uncomfortable longs to cap any advance.  More important is likely to be the Italian referendum on Sunday.