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A Modest Twist Flattening With US Activity Data, 2Y Supply Eyed

US TSYS
  • Cash Tsys sees a modest twist flattening, led by a 2bp cheapening in the front end and with a pivot only after 10s in a stagflationary collection of headlines through London hours. Global gas prices popped higher still (US no exception briefly clearing $10/MMBtu having been $5.5 in early July) and the Eurozone PMI printed sub-50 for the second month running although at least fared slightly better than expected.
  • JPM see the 2-year supply being digested with relative ease as investors might use the auction to cover shorts “given the large short base at the front end, very low dealer inventory levels in front-end coupon Treasuries, the moves since the July auction, and limited room for short-term Fed expectations to move materially higher before the release of the September data”.
  • 2YY +1.9bps at 3.329%, 5YY +0.9bps at 3.167%, 10YY +0.4bps at 3.018% and 30YY -0.3bps at 3.222%.
  • TYU2 trades just 2+ ticks higher at 117-25, close to yesterday’s low of 117-21+ and with key near-term support eyed at 117-14+ (Jul 21 low) as the bear cycle is still in play.
  • Data: S&P Global PMI Aug prelim (0945ET) before Richmond Fed mfg index Aug and new home sales Jul (1000ET)
  • Fedspeak: Kashkari (’23 voter) with audience Q&A at 1900ET
  • Bond issuance: US Tsy $44B 2Y Note auction (91282CFG1) – 1300ET
  • Bill issuance: US Tsy $60B 21D bill auction – 1130ET
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