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Attention On Fed-Treasury Fissures


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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