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Extending Late Session Highs

US TSYS
  • Initially led by the short end after London went home, shorts continue to unwind in late trade after the decent Treasury 2Y auction stopped through .6bp.
  • The Sep'24 10Y contract trades at a session high of 113-19 (unch) compared to 113-30.5 early overnight. Initial technical resistance at 114-03/114-16 (High Aug 6 / 76.4% of the Aug 5 - 8 pullback).
  • Curves twist steeper with the short end outperforming, 2s10s currently +4.328 at -7.860 after dis-inverting briefly on August 5 to +1.475. The 5s30s curve currently +3.032 at 46.715.
  • In conjunction with the creeping short end bid -- projected rate cut pricing through year end has gained vs. early Tuesday levels: Sep'24 cumulative -34.1bp (-31.8bp), Nov'24 cumulative -67.4bp (-64.7bp), Dec'24 -104.6bp (-99.2bp).
  • Heavy session Tsy futures volumes tied to Sep'24/Dec'24 roll efforts, 2s near 80% complete, 10s 70% complete.
  • Looking ahead to Wednesday: data limited to MBA Mortgage Applications at 0700ET. US Treasury auctions include $28B 2Y FRN re-open (91282CLA7) and 17W Bill sales at 1130ET, $70B 5Y note sale (91282CLK5) at 1300ET.
  • Scheduled Fed speak includes Fed Gov Waller at a payments conf in Mumbai (text, Q&A) at 0115ET while Atl Fed Bostic will discuss his economic outlook (no text, Q&A) later in the evening at 1800ET.
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