Most markets were contained overnight, halting a three-day rally in risky assets. Equities, commodities and the US dollar are little changed. US interest rates are lower.

Rates markets remain tied to the risk sentiment and are likely to continue to take cues from developments in other financial markets.

While risk assets seem to have stabilized, the backdrop has not really changed. Meanwhile, economic data in the US continue to be at odds with the narrative about an imminent recession. Given the volatility, we believe conditional trades offer better risk-reward.

The US dollar index (DXY) was confined inside the previous day's range, while US jobless claims fell from 269k to 262k (vs 275k expected). Claims are averaging 265k in Feb, below Jan's 284k average, and suggest a decent print for the Feb payrolls report. Event risks today: A quiet calendar today until US CPI tonight and a speech from the Fed's Mester.

We recommend selling USD 1y*5y ATM-50 receiver to buy ATM, ATM+35bp payer spread.

We maintain our 2y swap spread widener recommendation as an attractive way to position for a risk flare.