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Carry-Over Bid Post-FOMC, 10Y Yield at 5M Lows

US TSYS
  • Cash Tsys trading stronger on heavy volumes (TYH4>820k) following the FOMC steady rate annc, acknowledging inflation has eased but reiterated the Fed is "prepared to tighten policy further, if appropriate".
  • Support for Mar'24 10Y futures has receded slightly w/ Gilts, position adjusts following the BOE steady rate annc, no change to guidance: TYH4 +20 at 112-16.5 vs. 112-23 intra-day high, focus on technical resistance at 112-28.5 (1.618 proj of the Oct 19 - Nov 3 - Nov 13 price swing). Initial support well below at 111-09+ (High Dec 7 and a recent breakout level).
  • 10Y yield below 4.0% this morning to 3.9301% -- appr 5 month lows. Curves mixed,: 3M10Y -5.941 at -144.706, 2Y10Y +2.353 at -39.074.
  • SOFR futures remain strong discounting Chairman Powell's comment the Fed "prepared to tighten policy further, if appropriate" with SOFR Red pack (SFRZ4-SFRU5) up 0.150-0.175 at the moment.
  • Projected rate cuts for early 2024 climb higher: January 2024 cumulative -4bp at 5.293%, March 2024 chance of rate cut climbs to -84.3% vs. -62% late Wednesday w/ cumulative of -25.1bp at 5.082%, May 2024 fully pricing in the first cut with cumulative -51.3bp at 4.819%. Fed terminal at 5.33% in Feb'24.
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