The rates market continued to feel the pressure overnight, with duration selling off and 10-year Treasury futures widening by about 2 basis points. Activity picked up in the morning, as real money accounts stepped in to receive in the front end, signaling demand for duration. Hedge funds were active as well, paying in the 5s10s30s fly at the lows around 9.75bps.

As the session progressed into the afternoon, the tone shifted slightly. More accounts began receiving in duration, particularly in the 5-year part of the curve, while forward rate flows—especially 2y2y—remained two-sided.

Spreads continued their grind tighter across the curve, compressing by 1 to 1.75bps by the close. This tightening was driven by a combination of factors: fresh issuance hitting the market, dealers caught long and offloading risk, and a broader risk-off tone with equities under pressure.

In terms of flows, hedge funds were active sellers in both the belly and the long end, with some stop-outs going through. However, there was also renewed interest in adding to longs in the belly, hinting at some dip-buying behavior.

The SOFR/Fed Funds basis saw better selling in the 3-month segment, particularly after pressure hit SERFFJ5 and SERFFM5 in the morning, likely a reaction to GC rates opening higher. Meanwhile, spreads in the TU and 3-year areas found some buyers, adding another layer of complexity to today’s trading landscape.

All in all, the day was defined by tactical repositioning, continued curve compression, and signs of underlying demand in the belly—even amid broader market stress.