Less Willing To Bounce Than Peers

Tsys remain less willing to go bid than global peers.

• The likes of UK gilts and EGBs have drawn support from the aforementioned equity market weakness, as well UK wage & ECB inflation expectations data.
• That leaves TYH4 -0-13 at 112-06 after a look below yesterday’s worst levels.
• Cash Tsy yields are 6-7bp higher across the curve, which includes post-holiday catch up to yesterday’s ECB-speak-driven weakening in EGBs.
• FOMC-dated OIS shows ~160bp of cuts through ’24 (~10bp off post-PPI dovish extremes), with ~18bp of cuts priced through the March ’24 FOMC.
• An appearance from Fed Governor Waller provides the most interest when it comes to the NY docket (ahead of the pre-FOMC blackout, which goes into force this weekend)
• It's quite possible he leans on the 'still waiting to see inflation on a sustainable 2% trajectory' card, something a few FOMC speakers have used, including Bostic over the weekend, to help push back on rate cut expectations (the latter something a typically dovish Goolsbee also did explicitly late Friday).
• However, we suspect the main focus will be whether he offers a renewed timeline for the potential start to rate cuts. Recall from the Q&A of his Nov 28 appearance: “If you see this [lower] inflation continuing for several more months, I don't know how long that might be—3 months? 4 months? 5 months?—you could then start lowering the policy rate because inflation's lower."
• Empire manufacturing data is also due.