Curve Twist Steepens, Outrights Off Session Lows

The front end leads the rally from lows in Tsys, with yields sitting 2.5bp lower to 1bp higher across the curve.

• Outright yield grab and the move lower in China’s 5-Year LPR fixing dominate when it comes to broader discussions.
• Twist steepening is seen.
• 2s10s sit around the middle of the Feb range.
• 5s30s have ticked further away from Friday’s month-to-date flats.
• TYH4 remains comfortably within the recently observed range and last trades +0-04 at 109-28. Volume runs at a fairly normal ~226K.
• TY technical parameters are outlined in a recent post and bulls need to overcome those initial resistance levels to start turning the tide more in their favour, with the bearish threat remaining intact at present.
• FOMC-dated embeds a little more pricing re: rates cuts, although we still sit some distance away from recent dovish extremes.
• The first 25bp cut is fully discounted through the end of the June ’24 FOMC, while 93bp of cuts are priced through the Dec ’24 meeting.
• A reminder that markets did not want to challenge pricing of 75bp of cuts post-PPI (the move halted at ~78bp). 75bp of ’24 cuts lines up with the median Fed dot for ’24, as of the Dec ’23 SEP.