Alyce Andres
BloombergOctober 27,2022
The Treasury market’s rally off Friday’s low continues for a fourth day. That bodes well for a continued extension of this tactical rally.
Investors are going all in on the potential for the Fed to deliver a dovish pivot after soft details in the US 3Q GDP report and expectations for significant slowing in the European growth in the quarters ahead. Banks led the charge — buying heavily in the 5- and 7-year portions of the Treasury curve today, according to traders that saw the flow.
Ongoing short cover in Treasuries and EGBs also remained thematic today with demand via blocks in both 5- and 10-year Treasury futures and in upside options. Forward rolling was also reported in 5s by fast and real money. That involves the closing of a shorter-term derivative contract and opening of a new longer-term contract for the same underlying asset.
Dealers also reported steepeners in Euribor and SOFR futures in the 2023 sector. Meanwhile, a variety of cash players tactically sold into rally and unwound steepeners in Treasuries.