US Treasuries prices ended slightly lower Friday after the September NFP jobs report was weaker but overshadowed by upward revisions and strong AHE. In the aftermath of the data, January Fed funds moved to 98.645, or a 78% of December hike, up from 74% before the data.

Initially, flows were skewed towards better Treasury sellers and payers on rate in swaps — both mostly in the front end. That said, better buying in 10Y was clearly targeted for 2.39%-2.40%. Multiple shops reported better demand into the post NFP dip mainly in the belly, with trading accounts scooping up 10Y, real money buying 5Y while fast money initiated new 5/30Y steepeners and hedge funds in Red/Green steepeners via Eurodollar futures, a 2/3Y proxy.

Better buying was not exclusive to Treasuries but was also confirmed across the Canadian curve. Around 10:30am ET, Treasuries were also bid up on a story that North Korea is ready to test a missile capable of reaching the US western coast. There was chatter on this last week targeting Oct. 10 and Oct. 18 dates. Nonetheless, safe havens such as the yen, Swiss franc and gold were bid up on the news while cautious macro accounts sold in E-mini S&Ps and +12,000 Dec 10Ys were bought on a block paying 125-01+ at 11:06 am.

The energy markets seemed to be in a world of their own, selling off and unwinding some length after a very decent run up. Dealers confirmed indexers, CTAs and couple of global macro accounts sold crude, gas and natural gas into weakness. Others reported systematic sales hitting in natural gas. Late in the day, Saudi and Russian OPEC officials were on the tapes saying they would discuss what to do on production beyond March at the November meeting.

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