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Late Risk-Off Adds to Post-Powell Tsy Rally

US TSYS
  • Treasury futures surged to the highest levels since mid-March late Tuesday, strong safe haven buying evident after Iran orders attack on Israel for Tuesday's killing of Hamas political leader Haniyeh.
  • Tsy Sep'24 10Y futures blew through a couple resistance levels to a high of 112-08 (+22), with 112-10 (1.50 proj of the Apr 25 - May 16 - 29 price swing)
  • The late surge saw projected rate cut pricing into year end look steady to firmer vs. early Wednesday levels (*): Sep'24 cumulative -28.8bp, Nov'24 cumulative -46.9bp (-44.6bp), Dec'24 -72.4bp (-68.2bp).
  • Tsys had extended session highs prior to the Iran/Israel headlines after Fed Chairman Powell left the door open to a rate cut at the next FOMC meeting in September if inflation continues to cool and the labor market remains.
  • While keeping a close eye on data that suggests a normalizing labor market -- Chairmen Powell said "we have a lot of room to respond. If we were seeing weakness. That's not what we're seeing."
  • Early data support: Treasury futures extending gains after lower than expected private payroll ADP jobs figures. Tsy futures gap higher following Tsy refunding annc w/ no plan on increasing auction sizes for now, increase weekly buybacks. ECI slightly lower than expected.
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