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Bear Steeper After Reversing Dovish Reaction To GDP/Core PCE Miss

US TSYS
  • Cash Tsys trade 2-5bp cheaper, led by the long-end for an extension of the post-data steepening seen after a well digested 5Y TIPS auction (on the screws after October's 2bp tail). 2s10s stands at -46bps (+2.5bps).
  • It’s a sizeable pullback from highs seen shortly after notably softer than expected GDP/core PCE revisions for the third Q3 reading -- core PCE at 2.0% rather than 2.3% annualized in Q3 helps chime with Chair Powell seeing it at 3.1% Y/Y in Nov and the median FOMC dot looking for 3.2% in 4Q23.
  • The data were however also released along with better-than-expected jobless claims data, offering at least some support for the paring of those gains.
  • Against this backdrop, TYH4 trades at 112-21+ at the low end of the day’s range, having earlier pushed new recent highs of 113-04+ for another step closer to resistance at 113-12+ (Fibo projection of Oct-Nov price swing).
  • Tomorrow sees the closely watched monthly PCE report for Nov, as well as durable goods for Nov, finalized U.Mich consumer confidence for December after its surprising drop in inflation expectations in the preliminary report and new home sales.
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