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Curve Marginally Steeper, Pare Post-Fitch Gains

US TSYS

TYU3 deals at 111-01, +0-05, a touch off the base of the 0-07+ range on volume of ~109k.

  • Cash tsys sit 1bp richer to 1bp cheaper across the major benchmarks, the curve has twist steepened pivoting on 5s.
  • Tsys firmed in early dealing after Fitch downgraded the US to AA+ from AAA. Fitch noted that the rating change reflected an expected fiscal deterioration over the next three years, a high and growing government debt burden and repeated debt limit standoffs.
  • A retreat from session highs was observed, perhaps as the aforementioned Fitch downgrade was based on governance and medium term fiscal challenges but not new fiscal information. The move came alongside pressure on regional equities and the USD ticking higher.
  • FOMC dated OIS remain stable, a terminal rate of 5.40% is seen in November with ~60bps of cuts by June 2024.
  • There is a thin docket in Europe today. Further out ADP Employment provides the highlight.

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