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Back Near Early Session Highs

US TSYS
  • Treasury futures have drifted back to the upper half of the session range, curves flatter with short end rates underperforming. After the bell, 2s10s is back below -100 at -101.738, -3.256.
  • Rather decent volumes (TYU3>1.2M) for an inside range day after Tsys traded firmer overnight after lower than expected UK CPI data (0.1% MoM vs. 0.4% est) saw front month Sep'23 10Y futures hit 113-06.5 high.
  • Treasury futures pared early session gains, with 10s see-sawing to session low of 112-21 by midday: likely due to some deal-tied hedging pressure: rate locks on expected corporate issuance ($6.75B Morgan Stanley 4-tranche for instance) and/or pre-auction short sets ahead Tsy's $12B 20Y bond auction re-open at 1300ET.
  • The sale traded near in-line with WI: 4.036% high yield vs. 4.037% WI; 2.68x bid-to-cover vs. prior month's 2.87x. Indirect take-up 68.75% vs. 74.58% last month; direct bidder take-up 21.68% vs. 17.62% prior; primary dealer take-up 9.57% vs. 7.79%.
  • Projected rate hike expectations gain slightly: July 26 FOMC is 96% w/ implied rate of +24bp to 5.318%. September cumulative of +27bp at 5.347%, November cumulative of 32.2bp at 5.399%, and December cumulative of 26.8bp at 5.346%. Fed terminal holding at 5.405% in Nov'23.
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