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Bonds Back to Extending Highs Post-Dec FOMC Minutes

US TSY FUTURES
  • Treasury futures are making new session highs following a moderate round of two way trade after the Dec FOMC minutes release. Mar'24 10Y futures tap 112-20 (+10.5) high, 10Y yield back below 4% to 3.8918%.
  • Minutes balanced but with a dovish tone as officials note diminished inflation and need to start discussion of QT wind down sees projected rate cuts for early 2024 slightly better than recent highs:
  • January 2024 cumulative -2.1bp at 5.307%, March 2024 chance of rate cut -72.1% vs. -65.4% (-84.3% last Friday) w/ cumulative of -19.7bp at 5.132%, May 2024 chance of cut back to -94.8% vs. -87.2% immediately after the release, cumulative -42.9bp at 4.900%, June'24 cumulative -67.5bp at 4.653%. Fed terminal at 5.327% in Jan'24.
  • Still digesting the minutes, market focus turning to Thursday morning's ADP private employment at 0815ET tomorrow, followed by December employment release on Friday at 0830ET.

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