BOC SAYS DOESN'T NEED TO ALTER PATH OF QT RIGHT NOW

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FI Consolidation, Tsys Near Midrange for the Week

US TSYS
  • US Treasury futures continued to extend gains in late trade, near session highs to midrange for the week. Shorts consolidated following this morning's higher than expected Q3 GDP (4.9% vs. 4.5% est, 2.1% prior) - largely driven by inventories and softer than expected core PCE prices (2.4% vs. 2.5% est) and jobless claims (210k vs 207k est, 198k prior) at their highest in five months, suggesting that labor market tightness may start to wane.
  • Additional FI support after the $38B 7Y note auction (91282CJG7) stops through: 4.908% high yield vs. 4.910% WI; 2.70x bid-to-cover vs. 2.47x last month.
  • Current Dec'23 10Y futures are at 106-10 +20.5) vs. 106-13 high, still well below initial technical resistance of 106-31 (20-day EMA), 10Y yield at 4.8487% (-.1062) vs. 4.9873% high overnight. Curves reverse course - mostly flatter: 3M10Y at -61.524 (-8.971), 2Y 10Y -3.332 at -20.112.
  • FI short end support translates to softer projected rate hikes into early 2024: November holding at 1.6%, w/ implied rate change of +.4bp to 5.333%, December cumulative of 5.5bp at 5.383%, January 2024 cumulative 7.9bp at 5.408%, while March 2024 slips to 3.5bp at 5.364%. Fed terminal at 5.438% in Jan'24. Fed terminal at 5.410% in Feb'24.
  • Look Ahead: corporate earnings after the close that includes: L3Harris, Ford, Juniper Networks, Olin, Capital One, Intel, US Steel and Amazon. Friday data calendar includes Personal Income/Spending, UofM Inflation Exp
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