While we can't predict the future...stocks seem to be saying that 1428 will become the new center of value (its way to soon to call for this...we are just playing "what if"). If stocks setup around 1428 as the center of value for tomorrow, that puts 1418 easily within reach as the lower edge of the micro bell curve...which should put additional upward pressure on treasuries.
If ZN sets up a center of value around 133-07 vs 133-03 (just playing "what if"), that puts 133-15 easily within reach (rather than just 133-12) if stocks float down to the lower edge of their bell curve. So, 133-12 --> 133-15 is the upper end price range for ZN. This translates into 97-18 --> 97-28 as the expected upper range for the 30yr bond staying inside the inner bell curve.
If these scenarios play out, then I can envision making a sale in the 30yr to setup for the 30yr auction setup. Remember, we are not necessarily planning on playing the auction....that decision comes closer to 1pm tomorrow.
Other "what if" scenarios....hmm...well...just about anything can happen in the markets...but i would use the above scenario as a base case from which to modify to market gyrations over the next 16 hours. The key thought is...the higher the overnight center of value in treasuries (ZN, 30yr...doesn't matter)....the more price volatility we can expect....and hence, the higher price we would wait for to make an auction setup sale. Given the recent weakness in credit assets, I would rather wait to sell a pop in UST, than close my eyes and wait for 1pm tomorrow.
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