CPI Inflation Data Weighs Heavily on Tsys, Rate Cut Pricing Evaporates

Treasury futures gapped lower after this morning's higher than expected CPI inflation data kicked the day off: MoM (0.4% vs. 0.3% est), YoY (3.5% vs. 3.4% est); CPI Ex Food and Energy MoM (0.4% vs. 0.3% est), YoY (3.8% vs. 3.7% est).

• Jun'24 10Y futures fell to 108-16 post US CPI, before another move lower after a poorly received 10Y auction re-open tailed 3.3bp (largest since Dec'22: 4.560% high yield vs. 4.527% WI; bid-to-cover falls to 2.34x vs. 2.51x prior) reaching 108-05+. FOMC minutes saw little reaction, while a small bounce followed headlines - "US SEES MISSILE STRIKE ON ISRAEL BY IRAN, PROXIES AS IMMINENT", the contract closed at 108-07. As trading in Asian gets underway we open up + 03 from NY closing at 108-09+.
• Looking at technical levels: Initial support lays at 108-06+ (2.236 proj of Dec 27 - Jan 19 - Feb 1 price swing), below here 108-05+ (Apr 10 lows) and 108-00 (round number support). While to the upside resistance holds at 109-26+ (Apr 10 high), a break back above here would open up 110-06 (Apr 4 high)
• Cash Treasury curve Bear-flattened on Tuesday, with yields 12-23bps higher. The 2Y yield was -23bps at 4.973%, 10Y -18.2bp to 4.544%, while the 2y10y -4.857 at -43.163.
• Projected rate cut pricing remains well off morning levels: May 2024 at -2.6% vs. -4.7% earlier w/ cumulative -.6bp at 5.322%; June 2024 at -17.2% vs -55.1% earlier w/ cumulative rate cut -5bp vs -14.9bp at 5.279%. July'24 cumulative at -12.1bp vs. -24.4bp, Sep'24 cumulative -22.7bp vs. -41.2bp.
• Looking Ahead: PPI, Jobless Claims & Fed Speak