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Holding Modest Post Auction Gains

US TSYS
  • Curves holding flatter profiles (2Y10Y -3.447 at -51.340) with bonds outperforming since the $21B 30ZY reopen sale stopped .3bp through: 4.344% vs. 4.347% WI.
  • Trading desks had reported leveraged$ selling of CT30, real$ accounts selling off-the-run 30s into the post data rally, while unwinds of pre-auction short sets contributing to the post-auction bounce.
  • Currently, March'24 30Y futures trading at 119-17 (+17) -- still off this morning's post-CPI high of 120-09; March'24 10YT futures +9 at 110-19.5 vs 110-31.5 high. Initial technical resistance of 111-09+ (High Dec 7 and bull trigger) still intact.
  • Focus turns to Wednesday morning's PPI: MoM (-0.5%, 0.0%), YoY (1.3%, 1.0%), and of course the FOMC rate annc and SEP at 1300ET followed by Chairman Powell's presser at 1430ET.
  • The Fed will likely lower its median "dot plot" estimate for policy interest rates at the end of 2024 to around 4.9%, former officials and staffers told MNI, as expectations build for the first rate cut to come as early as the first half of the year.
  • "My expectation is that the median will probably show two 25-basis-point cuts next year," said ex-Boston Fed chief Eric Rosengren, whose own forecast is for two to three cuts starting as early as the second quarter.

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