Offline24h

UST curve bull-flattened mildly as 10Y yield eased 3bp to 4.17% amid thin liquidity, while 2Y held steady near 3.47% on resilient short-end demand. IG corp spreads unchanged at 1.01% for BBB, reflecting tight credit conditions and year-end positioning unwind. HY OAS ticked up 2bp to 2.83% on Jan 2, signaling minor risk repricing post-holidays. Curve steepener trades gained traction with 10Y-2Y spread widening to ~0.70%, supported by steady front-end amid Fed pause expectations. MBS underperformed peers with spreads grinding wider by 5bp vs UST, pressured by QT runoff and softer bank buying. EM bonds extended gains on carry appeal, outperforming amid dollar softening. Equities’ choppy open diverted flows to core duration, capping selloff in belly. Oil price drop eased inflation fears, bolstering rate cut odds for H1 2026. Upcoming US jobs data looms large; soft print could extend flattener unwind, targeting 10Y at 4.05%. Position for barbell: overweight 2Y/30Y UST, selective IG duration; fade HY if spreads breach 300bp. Risk-reward favors receivers in swaptions amid policy divergence risks from incoming administration. Volatility pickup likely tests carry trades, but liquidity buffers support grind lower in yields.