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CORRECTION Bull Flatteners, 5s10s (Not 5s30s!) Inverted Again

US TSYS
US FI markets climbed steadily through the session, bonds leading the rally finishing near session highs (30YY -.1115 at 3.0663%).
  • Yield curves bull flattening (2s10s -6.230 at 21.721, 5s30s -2.771 at -.846) amid renewed concerns over stagflation as equities tumbled on the back of mostly poor earnings/cutting guidance for large retailers this week tied to supply chain constraints, higher operating costs, etc.
  • On flattening curves, BMO portends the FOMC "will hike the economy into a recession, whether the ‘blame’ for the slowdown lies with monetary policymakers, subprime mortgages, or a global pandemic is a debate that can only be conducted with the benefit of hindsight. As such, while we are very much on board with 2s/10s revisiting negative territory, this does not necessarily ensure that an economic contraction is in the offing."
  • Tsy futures extending session highs (30YY 3.0968% at the moment) after $17B 20Y note auction (912810TH1) comes in on the screws: 3.290% high yield vs. 3.290% WI; 2.50x bid-to-cover vs. last month's 2.80x.
  • Thursday focus:
    • May-19 0830 Initial Jobless Claims (203k, 200k)
    • May-19 0830 Continuing Claims (1.343M, 1.320M)
    • May-19 0830 Philadelphia Fed Business Outlook (17.6, 15.0)
    • May-19 1000 Existing Home Sales (5.77M, 5.65M); MoM (-2.7%, -2.1%)
    • May-19 1000 Leading Index (0.3%, 0.0%)

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