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Fed Gov Reality Check For Projected Rate Cut

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  • Cash Treasuries are near late overnight lows, ongoing pressure after Fed Gov Waller said late Wednesday the Fed should wait a "couple months" to get a better understanding of the trajectory of inflation. That said, Waller still expects the central bank to begin reducing the target range for the federal funds rate this year.
  • Yields 5bp higher in the short end, curves bear flattening: 2s10s -2.813 at -41.012.
  • Heavy volume as Treasury futures reverse yesterday's rally, Jun'24 10Y futures near midrange for the week at 110-20.5 (-7.5) on volume of 361k at the moment. initial technical support at 110-08+/109-24+ (Low Mar 21 / 18 and the bear trigger).
  • Busy day ahead to wrap up the short week with markets closed tomorrow for Good Friday. Economic data: Weekly Claims, GDP and Personal Consumption at 0830ET, MNI Chicago PMI at 0945ET, followed by Pending Home Sales and UofM Sentiment at 1000ET. Kansas City Fed Mfg Activity wraps up the day at 1100ET.
  • US Treasury auctions: $75B 4W and $80B 8W Bills wrap up the week's Tsy supply at 1130ET (no coupon auctions next week).
  • Note: Friday data includes Personal Income/Spending, PCE Deflator, Adv Trade Balance, Retail/Wholesale Inventories, KC Fed Services. SF Fed Daly open remarks at policy conf at 1115ET while Fed Chairman Powell speaks at a moderated discussion at 1130ET.
  • Short end SOFR futures mildly weaker while projected rate cut pricing retreats (post-Waller): May 2024 at -9.8bp from -15% late Wednesday w/ cumulative -2.5bp at 5.302%; June 2024 -56.9% vs. -63.1% w/ cumulative rate cut -16.7bp at 5.159%. July'24 cumulative at -26.4bp vs. -30.06bp, Sep'24 cumulative -44.4bp from -49.3bp.
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  • Cash Treasuries are near late overnight lows, ongoing pressure after Fed Gov Waller said late Wednesday the Fed should wait a "couple months" to get a better understanding of the trajectory of inflation. That said, Waller still expects the central bank to begin reducing the target range for the federal funds rate this year.
  • Yields 5bp higher in the short end, curves bear flattening: 2s10s -2.813 at -41.012.
  • Heavy volume as Treasury futures reverse yesterday's rally, Jun'24 10Y futures near midrange for the week at 110-20.5 (-7.5) on volume of 361k at the moment. initial technical support at 110-08+/109-24+ (Low Mar 21 / 18 and the bear trigger).
  • Busy day ahead to wrap up the short week with markets closed tomorrow for Good Friday. Economic data: Weekly Claims, GDP and Personal Consumption at 0830ET, MNI Chicago PMI at 0945ET, followed by Pending Home Sales and UofM Sentiment at 1000ET. Kansas City Fed Mfg Activity wraps up the day at 1100ET.
  • US Treasury auctions: $75B 4W and $80B 8W Bills wrap up the week's Tsy supply at 1130ET (no coupon auctions next week).
  • Note: Friday data includes Personal Income/Spending, PCE Deflator, Adv Trade Balance, Retail/Wholesale Inventories, KC Fed Services. SF Fed Daly open remarks at policy conf at 1115ET while Fed Chairman Powell speaks at a moderated discussion at 1130ET.
  • Short end SOFR futures mildly weaker while projected rate cut pricing retreats (post-Waller): May 2024 at -9.8bp from -15% late Wednesday w/ cumulative -2.5bp at 5.302%; June 2024 -56.9% vs. -63.1% w/ cumulative rate cut -16.7bp at 5.159%. July'24 cumulative at -26.4bp vs. -30.06bp, Sep'24 cumulative -44.4bp from -49.3bp.