Free Trial

ISM Miss Helps Tsys Snuff Bearish Engulfing Candle

  • Treasury futures reversed early losses, gapped to new session highs (TYU3 114-03.5 high, yield tapped 3.6563% low) after May ISM services miss. Curves rebound with short end rates outperforming (2s10s taps -77.212 high).
  • Despite the bounce, technical focus is on the bearish engulfing candle posted Friday, signaling the end of the recent recovery and suggesting potential for a continuation lower. Attention is on key short-term support and the bear trigger at 112-29+, the May 26 / 30 low.
  • May ISM services disappointed: 50.3 (cons 52.4) after 51.9, printing the lowest since Dec’22. New orders led the decline at 52.9 (-3.2pts), driven domestically rather than external.
  • The prices paid index is notable, dropping to lowest since May’20 at 56.2 (-3.4pts) as they build further on March’s particularly sharp -6.1pt drop. Employment component also fell back below 50 (49.2, -1.6pts) for first time since December.
  • FOMC-dated OIS have lifted off lows seen after the ISM services miss. Near-term meetings are relatively little changed compared to the start of today’s NY session with June +7bp (unch) and July +20bp (-1.5bp) for a terminal that doesn’t fully price another hike.
  • Beyond that, implied rates are down more heavily on the day but remain notably higher than before Friday’s payrolls report. For example, the 4.99% implied effective for the Dec FOMC (marking 9bp of cuts from current levels) is down 4bps since the start of the session but still 11bps higher since payrolls.

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.