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Little Change in Economic Activity: Beige Book

US TSYS
  • Treasury futures holding weaker but off midday lows, partially due to $16B total corporate bond issuance pricing and rate locks being unwound, TYM3 currently at 114-06 (-9.5) vs. 113-30.5 low, yield 3.6023% high.
  • From a technical perspective, 10Y futures remain in a short-term downtrend as the contract extends the pullback from 117-01+, the Mar 24 high. The contract has recently traded through both the 20- and 50-day EMAs and has pierced the 114-00 handle today. This signals scope for weakness to 113-23, a Fibonacci retracement.
  • Curves bear flattened earlier, extending inversion to -66.009 low at -64.181 currently amid chunky short end selling earlier. Projected rate hikes over the next three FOMC meeting firm up (Fed funds implied hike for May'23 at 22bp, Jun'23 +29.7bp cumulative at 5.126%, Jul'23 +25.4bp at 5.083%).
  • Large corporate bond issuance ($8.5B Bank of America 2-part, $7.5B Morgan Stanley 3-part) in addition to pre-auction short sets ahead the US Treasury $12B 20Y bond auction re-open weighed on Treasury futures through midday.
  • No significant react to data, Federal Reserve Releases Beige Book showed little change in economic activity over the last few weeks while MBA Mortgage Applications recently announced: -8.8% last week (5.3% prior).
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