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30YY At 4-Wk Highs, Yield Curves Bear Steepen

US TSYS

Tsy futures holding narrow range near lows by the close, 30YY tapped 3.2339% high earlier - highest since July 11, currently 3.2213%. Yield curves bear steepened w/2s10s +4.141 at -28.004 - August 1 level.

  • Initial cross-over weakness from EGBs followed higher than expected German PPI overnight (+5.3%, +37.2% YoY due to surge in energy prices); UK retail sale up 0.3% last month, but the cost of those sales increased more rapidly by 1.3%.
  • Little react to Richmond Fed Barkin this morning as he reiterates the Fed is "very seriously" focused on inflation and will do "what it takes" to lower it to 2% despite "risk of recession on path to 2%". No new ground there, trading desks set sights on next Fri's annual eco-summit in Jackson Hole, Fed Chair Powell scheduled at 1000ET.
  • After a decent start, trade volume thinned out in the second half (TYU2 just over 1M), no Tsy or corporate supply, though Tsy Sep/Dec rolls generating some volume (Dec takes lead Wed, Aug 31). Sep options also expire next week Friday could start to generate some two-way hedging on the day.
  • Technicals for TYU2 currently trading 118-03 (-24.0), Treasuries maintain a softer tone and the contract has traded lower today. 118-05, 50.0% of the Jun 14 - Aug 2 bull cycle, has been cleared and this signals scope for an extension towards 117-14+ next, the Jul 21 low. Price has recently cleared a trendline support drawn from the Jun 14 low and this reinforces the current bearish theme. Initial firm resistance is at 119-31, the Aug 15 high.
  • Currently, 6.2bps at 3.259%, 5-Yr is up 8bps at 3.1071%, 10-Yr is up 9.9bps at 2.9813%, and 30-Yr is up 8.2bps at 3.2188%.
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Tsy futures holding narrow range near lows by the close, 30YY tapped 3.2339% high earlier - highest since July 11, currently 3.2213%. Yield curves bear steepened w/2s10s +4.141 at -28.004 - August 1 level.

  • Initial cross-over weakness from EGBs followed higher than expected German PPI overnight (+5.3%, +37.2% YoY due to surge in energy prices); UK retail sale up 0.3% last month, but the cost of those sales increased more rapidly by 1.3%.
  • Little react to Richmond Fed Barkin this morning as he reiterates the Fed is "very seriously" focused on inflation and will do "what it takes" to lower it to 2% despite "risk of recession on path to 2%". No new ground there, trading desks set sights on next Fri's annual eco-summit in Jackson Hole, Fed Chair Powell scheduled at 1000ET.
  • After a decent start, trade volume thinned out in the second half (TYU2 just over 1M), no Tsy or corporate supply, though Tsy Sep/Dec rolls generating some volume (Dec takes lead Wed, Aug 31). Sep options also expire next week Friday could start to generate some two-way hedging on the day.
  • Technicals for TYU2 currently trading 118-03 (-24.0), Treasuries maintain a softer tone and the contract has traded lower today. 118-05, 50.0% of the Jun 14 - Aug 2 bull cycle, has been cleared and this signals scope for an extension towards 117-14+ next, the Jul 21 low. Price has recently cleared a trendline support drawn from the Jun 14 low and this reinforces the current bearish theme. Initial firm resistance is at 119-31, the Aug 15 high.
  • Currently, 6.2bps at 3.259%, 5-Yr is up 8bps at 3.1071%, 10-Yr is up 9.9bps at 2.9813%, and 30-Yr is up 8.2bps at 3.2188%.