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Front End Cheapening Impetus Reverses Post CPI Steepening

US TSYS
  • The combination of the 1100ET announcement of decent increases to bill sizes plus Fed OIS implied rates pushing higher (Dec’23 +5bps on the day) has helped spur some further cheapening bias at the front-end with 2YY briefly touching highs since Mar 10 before pulling back 1-1.5bps for still +5bps on the day.
  • The front end action has dragged the rest of the yield curve higher still, for an intraday flattening in a reversal of post-CPI steepening, with 2 through 10 benchmark yields +5-6bps on the day after the latest paring of losses.
  • TYU3 also briefly pushed session lows of 113-02+, through yesterday’s 113-03 and nearer to key support at 112-29+ (May 6/30 lows) after which would lie 112-16 (76.4% retrace of Mar 2 - May 4 rally).

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