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Curves Remain Steeper As Bonds Trim Gains Late

US TSYS
  • Treasury futures trade mixed after the bell, bonds trimming gains late (USU3 -3 at 116-05 vs. 116-21.5 high) while curves hold steeper but off session highs (2s10s +7.403 at -88.587 vs. -86.662 high). Generally quiet second half.
  • Treasury futures gapped higher after smaller than expected at June jobs gain of 209k (cons 230K) and the key initial takeaway is the -110k two-month revision (-33k for May (so still v strong at 306k) and -77k for April).
  • Futures had reversed support/traded lower post-data w/ attention on strong labor market, AHE firm at +.4, workweek extended to 34.3 hours should keep the FED on track to hike at the next FOMC meeting on July 26 (92% priced in).
  • Weakness was short lived as Treasury futures bounced off session lows, see-sawing back near post-Jobs data highs at the moment as focus turned back to moderating jobs gains (and down-revisions to the two prior releases) ahead of next Wednesday's CPI (MoM 0.3% est vs. 0.1% prior; YoY 3.1% vs. 4.1% prior).
  • Projected rate hike(s) receded through year end again: September cumulative of +28.6bp (30.5 high) at 5.360%, November cumulative at 34bp (37.3 high) at 5.415%, December cumulative 29.3bp (34.4 high) at 5.368%. Fed terminal at 5.42% in Nov'23.
  • The Federal Reserve may need to tighten monetary policy a little bit further this year but has already done most of the work in raising interest rates to control inflation, Chicago Fed President Austan Goolsbee said Friday. "There are some more moderate increases to come. I'm still undecided" on July, he told CNBC in an interview.
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