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Bear Steepening With Retail Sales, 20Y Note And FOMC All Ahead

US TSYS
  • Cash Tsys have cheapened in a move that was sparked by a strong beat for UK inflation in headline and core alike, building on yesterday’s strength in Canadian core CPI.
  • It has helped the terminal rate implied by Fed Funds push back to pre-US CPI levels of 3.70%, more consistent with past FOMC commentary on the need for higher rates for longer, which rather than dampening growth expectations and weighing on long end yields, has instead seen the curve steepen a little further off recent lows with 2s5s at -28bps and 2s10s at -43bps.
  • 2YY +3.2bps at 3.289%, 5YY +6.0bps at 3.103%, 10YY +5.8bps at 2.862% and 30YY +4.2bps at 3.131%.
  • TYU2 trades 11+ ticks lower at 119-01, nudging support at 118-30+ (Aug 12 and Jul 22 lows). The move lower has been considered corrective but could extended with the opening of 118-05 (50% retrace of Jun 14 – Aug 2 bull cycle).
  • Data: Retail sales for July headline plus business inventories for June and weekly MBA applications.
  • Fed: FOMC minutes plus two appearances from Governor Bowman although topics could limit direct mon pol implications.
  • Bond issuance: US Tsy $15B 20Y Bond auction (912810TK4) – 1300ET
  • Bill issuance: US Tsy $30B 119D bill CMB auction – 1130ET

Source: Bloomberg

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  • Cash Tsys have cheapened in a move that was sparked by a strong beat for UK inflation in headline and core alike, building on yesterday’s strength in Canadian core CPI.
  • It has helped the terminal rate implied by Fed Funds push back to pre-US CPI levels of 3.70%, more consistent with past FOMC commentary on the need for higher rates for longer, which rather than dampening growth expectations and weighing on long end yields, has instead seen the curve steepen a little further off recent lows with 2s5s at -28bps and 2s10s at -43bps.
  • 2YY +3.2bps at 3.289%, 5YY +6.0bps at 3.103%, 10YY +5.8bps at 2.862% and 30YY +4.2bps at 3.131%.
  • TYU2 trades 11+ ticks lower at 119-01, nudging support at 118-30+ (Aug 12 and Jul 22 lows). The move lower has been considered corrective but could extended with the opening of 118-05 (50% retrace of Jun 14 – Aug 2 bull cycle).
  • Data: Retail sales for July headline plus business inventories for June and weekly MBA applications.
  • Fed: FOMC minutes plus two appearances from Governor Bowman although topics could limit direct mon pol implications.
  • Bond issuance: US Tsy $15B 20Y Bond auction (912810TK4) – 1300ET
  • Bill issuance: US Tsy $30B 119D bill CMB auction – 1130ET

Source: Bloomberg