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Bull Steeper Off Tuesday’s Lows, Back Close To Initial Post-CPI Levels

US TSYS
  • Cash Tsys trade 1-5bp richer, led by the front end for a bull steepening, as the move unwinds yesterday’s late extension of the CPI rally to leave levels back close to where they were shortly after CPI.
  • The move is helped by sizeable rallies in Europe, especially Gilts on softer than expected CPI inflation.
  • TYH4 at 109-26+ (+ 06+) sits close to the day’s highs established after UK CPI, on strong volumes of 455k with only very little impact from the still early days of the quarterly roll. It remains vulnerable, with support at 109-17 (50% of Oct 19 – Dec 27 bull phase) after which sits 109-05+ (Nov 28 low). Resistance meanwhile is seen at 110-16 (Feb 9 low).
  • Fed Funds implied rates have pulled back off highs seen late in yesterday’s session, but still only price 3bp of cuts for March, a cumulative 26.5bp for May and 93bp in total for 2024.
  • Today sees focus on PPI annual revisions before further Fedspeak to assess any post-CPI reactions. VC for Supervision Barr could be of note as he is also set to talk on mon pol rather than just banking supervision.
  • Data: Weekly mortgage data (0700ET), PPI annual revisions
  • Fedspeak: Goolsbee (’25 voter) in Q&A (0930ET), VC Supervision Barr (perm voter) on mon pol and bank regulation (1600ET, incl text).
  • Bill issuance: US Tsy $60B 17W Bill auction (11130ET)
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