Market Roundup: 75Bp Hike No Longer in Question Post-CPI

Tsy futures gapped off early session highs (30YY initially hit 3.5494% high) following higher than expected August CPI +0.1 vs. -0.1% est, Core +0.6% - underscoring a 75bp hike from the Fed next week.

• Decent two-way trade after the initial sell-off, fast- and real$ buying 10s-30s, followed by renewed selling to new session lows across the board, 30YY climbed to 3.5696% amid some trepidation of another poor auction today ($18B 30Y Bond re-open at 1300ET). Curve flattener/steepener unwinds see's 2s10s extend inversion: -31.558 low vs. -20.556 pre-data.
• Post-data makes 75bp hike next week a lock, traders say, while short end futures started to pricing in small chance (appr 15%) of 100bp hike next week:
  • Sep'22 futures (SFRU2) currently -0.1275 to 96.5575 (96.5475 low);
    
  • October Fed Funds futures FFV slips to 96.855 low (-0.085)
  • See 1100ET bullet on real yield jump keeping inflation breakeven under control.
• Technicals for Dec 10Y currently at 114-28.5 (-23): post-data sell-off marks resumption of the current bear cycle that started Aug 2. Sights are on the key support at 114-06, the Jun 14 low. A break of this level would confirm an important technical break and highlight a resumption of the broader downtrend, exposing the 114-00 handle. Initial firm resistance is at 116-26, the Sep 2 high.
• Other significant movers on prospect for hawkish Fed moves: Stocks off sharply w/ SPX below 4000.0 (-135.0), crude weaker but off lows (WTI 87.15 -0.83), Gold off lows currently at 1705.33 -19.21, USD index gaps higher DXY +1.177 at 109.503 +1.173.