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Holding Lows After Large 10Y Auction Tail

US TSYS
Tsys weaker after the close, holding narrow range, near lows through the second half. Two significant periods where Tsys sold off/extended lows.
  • FI market support evaporated midmorning after domino effect of: surge in crude prices (WTI tapped 73.94 high) triggered fast sell-off in Bunds, Gilts and Tsys. Others, however, suggested midmorning sale was tied to WSJ economist Timiraos story suggesting the Fed is "divided" over path of monetary policy.
  • Tsy 10Y auction reopen spurred the second sell-off in rates (10YY tapped 3.2620% high; 30YY 3.5939% high). Little react to in-line: $40B 3Y note auction (91282CGA3) 4.093% high yield vs. 4.092% WI; Tsys gapped lower after $32B 10Y note auction re-open (91282CFV8) tailed w/ 3.625% high yield vs. 3.590% WI - largest for the year, surpassing last month's 3.2bp tail.
  • No data Monday, markets await Nov CPI release on Tuesday (MoM 0.3% est, 7.3% YoY), final FOMC of 2022 Wed afternoon.
  • FOMC will step down the pace of rate hikes to 50bp at the December meeting. But it will likely signal via the Dot Plot that it intends to tighten by a further 75bp to a terminal rate above 5% in 2023.
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