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10Y Yield Back Below 4% Ahead PPI

US TSYS
  • Treasury futures near late session highs but still shy of this morning's initial knee-jerk bid following more-or-less in-line CPI inflation data: CPI MoM (0.3% vs. 0.2% est), YoY (3.4% vs. 3.2% est); Ex Food and Energy MoM (0.3% vs. 0.3% est), YoY (3.9% vs. 3.8% est).
  • Tsys climbed off midmorning lows in a positive reaction to Croatian National Bank governor Boris Vujcic comment at a MNI Connect webcast that the ECB should cut interest rate in 25bps increments, although 50bps moves should not be excluded if warranted by incoming data.
  • Tsys ignored Cleveland Fed Mester comment that March is probably too early for a rate cut, focusing on dovish comments from Richmond Fed Barkin: needs convincing evidence inflation is stabilizing, but is open to cutting "once inflation on track to 2%".
  • FI market bounce seems rather tepid, however, as markets await tomorrow morning's PPI data before committing. MN Fed President Kashkari speaks about economic conditions tomorrow as well (1000ET).
  • Modest post-auction support as short sets reversed ($21B 30Y auction reopen (912810TV0) stops through for the second consecutive time: 4.229% high yield vs. 4.231% WI; 2.37x bid-to-cover vs. 2.43x in the prior month (2.38x 5-auction average.
  • Curves near two-month highs: 2s10s taps -27.670, last seen November 7. Meanwhile, 10Y yield slipped below 4% late to 3.9847 (-.0436). Initial technical resistance for Mar'24 10Y futures up above at 112-19 (High Jan 4); support holds at 111-06+ (Low Jan 05).

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