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Late Market Roundup: Yields Higher Ahead Fri's Personal Income

US TSYS

Tsys have another whip-saw session, weaker across the board after the bell (30YY 3.6207% +.0270) to near mid-range for the session, yield curves flatter after spending much of the day steeper (2s10s -1.022 at -69.981). Robust volumes on two-way trade (TYH3>1.1m).

  • Tsys extend lows (30YY taps3.662% high) before bouncing slightly after Q4 GDP climbs 2.9% (annual rate) - higher than estimated 2.6%, The real GDP beat for the Q4 advance was much less flattering in the details, heavily boosted by changes in inventories swinging from -1.2 to +1.5pps. Weekly claims lower than exp at 186k vs. 205k est, Core Durables beat and New Home Sales stabilized.
  • Tsys pared losses after strong $35B 7Y note auction (91282CGJ4) breaking string of three consecutive tails w/ 3.517% high yield vs. 3.537% WI; 2.69x bid-to-cover vs. 2.45x last month. Also of note - January was clean-sweep for Tsy coupon/bond auctions, every one trading through this month.
  • Fed funds implied hike for Feb'23 at 26.4bp, Mar'23 cumulative 46.9bp to 4.798%, May'23 56.8bp to 4.897%, terminal at 4.895% in Jun'23.
  • Focus turns to Friday's personal income (+0.1% vs. +0.4%) and spending (-0.3% vs. +0.1%) release, last component ahead next week Wed's FOMC policy annc.
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