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Market Roundup: Yields Looking to Test Early Session Highs

US TSYS

Tsys remain weaker, Bonds heading back near early session lows (30YY taps 3.1596%) in late morning trade, pace of trade slowing down ahead this afternoon's 20Y Bond auction at 1300ET and release of July FOMC minutes at 1400ET. Yield curves mixed, short/intermediates steeper but off overnight highs (2s10s +1.889 at -44.272 vs. -42.169 high).

  • US rates sold off overnight after higher than expected UK CPI (+0.6% MoM; +10.1 YoY) underscored expectations of further tightening from the BoE.
  • Fast two-way trade on decent volumes after steady July Retail sales read vs. +0.1% est (prior 1.0% revised to +0.8%), but higher in Ex-Auto +0.4% MoM vs. -0.1% est (prior 1.0% revised to +0.9%), ex-Auto/Gas +0.7% vs. 0.4% est and Control Group +0.8% (prior 0.8% revised +0.7%) vs. 0.6% est.
  • Technicals for TYU2 currently trading 118-19 (-25.5) - prices through first support at 118-30+ and on track to test the contract 50-dma of 118-16. This sees prices complete the reversal off the 120-00 handle resistance as well as the 120-22 post-CPI high and seals the outlook as bearish. First support crosses at 118-05, the 50.0% retracement of the Jun 14 - Aug 2 bull cycle. Initial resistance remains 120-22, the Aug 10 high.
  • Incoming corporate issuance, Sep/Dec Tsy rolling also continues to generate two-way hedging/unwinds.
  • Currently, 2-Yr yield is up 9bps at 3.3476%, 5-Yr is up 11.7bps at 3.0701%, 10-Yr is up 10bps at 2.9041%, and 30-Yr is up 6.4bps at 3.153%.
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