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2024 Projected Rate Cuts Moderate Slightly

US TSYS
  • Tsys hold firm, inside relatively narrow session range by Tuesday's close. March'24 10Y futures (TYH4) currently +2 at 112-21 vs. 112-24 intraday high on very light volume (TYH4 350k) with European exchanges closed for Boxing Day holiday. Initial technical resistance above at 113-04.5 (Dec 21 high), followed by 113-12+, a Fibonacci projection point. Key short-term support is at 109-31+, the Dec 11 low. Initial firm support is at 111-09+, the Dec 7 high.
  • Limited reaction, if any after FHFA House Price Index comes in weaker than expected at +0.3% (+0.5% est), S&P CoreLogic CS mildly stronger than expected for MoM (0.64% vs. 0.60% est; YoY 4.87% vs. 4.85% est.).
  • Tsy futures bounce (TYH4 +2 at 112-21, FVH4 steady) after the $57B 2Y note auction (91282CJS1) trades through: 4.314% high yield vs. 4.320% WI; 2.68x bid-to-cover vs. 2.54x prior.
  • Indirect take-up climbed back to 61.85% vs. 57.38% prior (5-auction average of 65.2%), directs took 19.51% vs. 23.86% last month (20.05% 5-auction average), primary dealer take-up 18.63%
  • Projected rate cuts for early 2024 holding steady to mildly softer vs. Friday with short end futures weaker: January 2024 cumulative -3.8bp at 5.290%, March 2024 chance of rate cut -81.4% vs. -90.1% late Friday w/ cumulative of -24.1bp at 5.087%, May 2024 pricing in a full 25bp cut with cumulative -49.8bp at 4.829%, June'24 cumulative -75.8bp at 4.570%. Fed terminal at 5.325% in Jan'24.
  • Wednesday Data Calendar: Richmond, Dallas Fed Data; 2Y FRN and 5Y Note Sales
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