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US TSYS: Curves Close To YtD Steeps, Govt Shutdown Odds Surge

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Treasuries have steepened further overnight with the front end continuing to pare Wednesday’s Fed-induced sell-off but still not fully pricing two further 25bp cuts for Dec (see STIR bullet).
  • Political developments are to the fore after yesterday’s collapse of the latest spending plan, with Polymarket showing a 70% implied probability of a government shutdown. See our political risk team’s write-up on the matter here.
  • Cash yields are 0.5-4.6bp lower on the day, with the declines led by the belly after being dragged higher by a particularly weak 5Y TIPS auction yesterday with a 6.7bp tail.
  • 2s10s of 26.6bps (+1.6bp) is close to yesterday’s fresh ytd high of 28bps.
  • TYH5 is close to session highs of 108-29 (09+) on reasonable volumes of 305k. It continues a lift off yesterday’s low of 108-16+ (now an initial support level). The bear trend remains intact with further support at 108-12+ (1.382 proj of the Oct 1-14-16 price swing) whilst resistance is seen at 110-07+ (20-day EMA).
  • Data: Monthly PCE report Nov (0830ET), U.Mich final Dec (1000ET), Kansas Cit Fed services Dec (1100ET)
  • Fedspeak: Daly on BBG TV (0730ET), Williams on CNBC (0830ET)
US 2s10s (chart showing mid price)   Source: Bloomberg
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  • Treasuries have steepened further overnight with the front end continuing to pare Wednesday’s Fed-induced sell-off but still not fully pricing two further 25bp cuts for Dec (see STIR bullet).
  • Political developments are to the fore after yesterday’s collapse of the latest spending plan, with Polymarket showing a 70% implied probability of a government shutdown. See our political risk team’s write-up on the matter here.
  • Cash yields are 0.5-4.6bp lower on the day, with the declines led by the belly after being dragged higher by a particularly weak 5Y TIPS auction yesterday with a 6.7bp tail.
  • 2s10s of 26.6bps (+1.6bp) is close to yesterday’s fresh ytd high of 28bps.
  • TYH5 is close to session highs of 108-29 (09+) on reasonable volumes of 305k. It continues a lift off yesterday’s low of 108-16+ (now an initial support level). The bear trend remains intact with further support at 108-12+ (1.382 proj of the Oct 1-14-16 price swing) whilst resistance is seen at 110-07+ (20-day EMA).
  • Data: Monthly PCE report Nov (0830ET), U.Mich final Dec (1000ET), Kansas Cit Fed services Dec (1100ET)
  • Fedspeak: Daly on BBG TV (0730ET), Williams on CNBC (0830ET)
US 2s10s (chart showing mid price)   Source: Bloomberg