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Attention On Fed-Treasury Fissures

US TSYS SUMMARY

Tsys are well off overnight highs, with attention firmly on the Fed following last night's ructions with the US Treasury over the fate of emergency lending programs.

  • Dec 10-Yr futures (TY) up 2.5/32 at 138-14 (L: 138-12.5 / H: 138-20). Curve's mixed: 2-Yr yield is up 0.2bps at 0.1634%, 5-Yr is up 0.7bps at 0.3795%, 10-Yr is up 1.1bps at 0.8406%, and 30-Yr is up 0.6bps at 1.5511%.
  • Thursday's post-NY close news that Treas Sec Mnuchin Thursday told Fed it would let COVID emergency lending facilities expire at year-end rather than be extended saw Tsys rally into Asia-Pac trading, but that move has been largely reversed.
  • Relief was provided as it was noted the Treasury would target the freed-up funds for PPP grants, and would agree to extend other facilities (such as Commercial Paper).
  • Still, with the Fed pushing for an extension of programs into 2021, expect to hear more about this fissure in coming days and how it may impact the December FOMC decision.
  • On that note, today's Fed speakers include Chicago's Evans (0830ET on CNBC), Dallas' Kaplan (also 0830ET), Richmond's Barkin and Atlanta's Bostic (0900ET), and KC's George (1330ET).
  • Dearth of data today and no supply, but we get a fairly sizeable $12.8bn in NY Fed operational purchases at the short-end (0-2.25Y).
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