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Great Expectations, For Lower Rates

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  • Continued speculation over more than an expected 25bp rate cut at next Wednesday's FOMC policy announcement (includes Summary of Economic Projections), buoyed short end rates as curves climbed to the steepest levels since early July 2022 (2s10s 8.816 high) Friday.
  • Sep'24 Treasury futures trade +7 at 115-13 after the bell, compared to 115-18.5 overnight high, well inside initial technicals: resistance at 115-23.5 (High Sep 11), support at 114-27.5/13 (Low Sep 10 / 20-day EMA).
  • Projected rate hikes through year end firmer vs. late Thursday levels (*) : Sep'24 cumulative -38.1bp (-31.5bp), Nov'24 cumulative -76.6bp (-68.6bp), Dec'24 -117.4bp (-107.5bp).
  • Treasury futures held inside a narrow session range after UofM data showed a slight increase in sentiment, a dip in 1Y inflation expectations vs. a slight increase in 5-10Y expectations. 1Y inflation: 2.7% (cons 2.8) after 2.8% in Aug to dip to its lowest since Dec 2020. For what it’s worth, three of the four latest preliminary reports have been revised down in the final release as well.
  • Import prices were softer than expected in August at -0.3% M/M (cons -0.2), and more notably import prices ex-petroleum at -0.1% M/M (cons 0.2).
  • Slow start to the week ahead with Empire Manufacturing early Monday, Tuesday Retail Sales precedes Wednesday's FOMC annc at 1400ET.
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  • Continued speculation over more than an expected 25bp rate cut at next Wednesday's FOMC policy announcement (includes Summary of Economic Projections), buoyed short end rates as curves climbed to the steepest levels since early July 2022 (2s10s 8.816 high) Friday.
  • Sep'24 Treasury futures trade +7 at 115-13 after the bell, compared to 115-18.5 overnight high, well inside initial technicals: resistance at 115-23.5 (High Sep 11), support at 114-27.5/13 (Low Sep 10 / 20-day EMA).
  • Projected rate hikes through year end firmer vs. late Thursday levels (*) : Sep'24 cumulative -38.1bp (-31.5bp), Nov'24 cumulative -76.6bp (-68.6bp), Dec'24 -117.4bp (-107.5bp).
  • Treasury futures held inside a narrow session range after UofM data showed a slight increase in sentiment, a dip in 1Y inflation expectations vs. a slight increase in 5-10Y expectations. 1Y inflation: 2.7% (cons 2.8) after 2.8% in Aug to dip to its lowest since Dec 2020. For what it’s worth, three of the four latest preliminary reports have been revised down in the final release as well.
  • Import prices were softer than expected in August at -0.3% M/M (cons -0.2), and more notably import prices ex-petroleum at -0.1% M/M (cons 0.2).
  • Slow start to the week ahead with Empire Manufacturing early Monday, Tuesday Retail Sales precedes Wednesday's FOMC annc at 1400ET.