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Implied Cuts Cooling Ahead Month End

  • Treasury futures are see-sawing around mostly higher levels after the bell, paring short hedges while front end rates hold weaker as implied rate cuts in the second half of the year continue to soften (Fed funds implied hike for Dec'23 44.8 cumulative at 4.364%).
  • Modest volumes on the day on inside ranges across the board, TYM3 under 1M contracts at the moment, as accounts take a breather to consider risk profiles going into Friday's month end.
  • Treasury futures mirroring weaker Bunds early in the session after German Prelim March harmonized CPI comes out higher than estimated (1.1% MoM vs. +0.8% est). A delayed sell-off followed slightly higher than expected weekly claims (+198k vs. +195k est) while second revision of Q4 GDP +2.6% vs. +2.7% est (Consumption +1.0%; Deflator +3.9%; PCE Core +4.4%)
  • Additional early pressure from stocks taking another leg higher (SPX Eminis +20.0 at 4077.50) amid reports of safe haven unwinds, chatter over reallocation from rates to stocks into month-end.
  • Focus turns to Friday's PCE, PMI and UofM Sentiment, Fed speakers: Williams, Cook and Waller later in the evening.

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