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Bouncing Off Post-Data Lows

US TSYS
  • Treasury futures trading steady to mixed, well above pre-data levels on heavy volumes (TYU3>820k) as soft Empire State (-19.0 vs. -1.0 est) partially offset strong Retail Sales. Trading desks suggest smart money accounts unwinding shorts after anticipating the strong Retail Sales due to strong credit card data.
  • Short end trading in the green now, Sep'23 2Y +1.62 at 101-12.38. Curves steeper but off highs, 2Y10Y +3.333 at -74.858.
  • In turn, rate hike projections through year end are off initial highs: Sep 20 FOMC is 11% w/ implied rate change of +2.7bp (+3bp high) to 5.356%. November cumulative of +10.1bp (11.1bp high) at 5.43, December cumulative of 7.9bp (9.6bp high) at 5.408%. Fed terminal slips to 5.42% in Nov'23.

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