Skittish rates still trading weaker on inside range. Morning swings unlikely related to session data: Trade Deficit slightly wider than expected (-$85.5B vs. -$84.7B exp), weekly claims slightly higher than expected at 235k vs. 230k, continuing claims +1.375M vs. 1.328M. But could be associated to positioning ahead Friday's June employment report (268k est vs. 390k prior).
- Further curve inversion after the minutes keeps recession talk in the foreground while the FOMC admits inflation is job 1 and tightening will weaken the economy. Markets price in 75bp hike at the end of the month, but struggle with forward guidance: looking at rate cuts one year hence.
- Or simply thin summer participation and muted balance sheet tolerance to risk. Overall volumes rather decent for early summer trade, however, TYU2 currently 745k.
- Technicals for TYU2: Treasuries have retreated from Wednesday’s 120-16+ high. The trend condition remains bullish and short-term weakness is considered corrective. Current trend conditions remain bullish following recent gains and the breach of the 50-day EMA. This signals scope for a continuation higher towards 120-19+, the May 26 high. Key short-term support has been defined at 116-11, Jun 28 low. A break is required to signal a possible reversal.