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Market Roundup: New Tsy Yld Highs, Pricing More Hikes, US$ Surge

US TSYS

Tsys well off late overnight lows ahead midday, yield curves unwinding a fair portion of Thu's steepening with bonds holding near top end of the range: 2s10s -5.390 at -46.444 after 2YY made new 15Y high of 4.2657% this morning, currently 4.1946% +.0724.

  • Tsy dipped briefly after better than exp S&P US Sep Flash Mfg PMI: 51.8 vs. 51.0 est, much better than expected services (49.2 vs. 45.5 est) and comp (49.3 vs. 46.1) still contractionary (below 50).
  • Otherwise, Tsys and EGBs tracked Gilts amid heavy selling in short end to intermediates after fiscal event concluded by Chancellor Kwasi Kwarteng in the House of Commons earlier. Event marked largest shift in the policy stance of the Conservative party in a generation. Bloomberg reports that the cost of the package will be GBP161bn over five years.
  • In the aftermath of Wed's 75bp Fed and Thu's 50bp BoE hikes, debate over how much hawkish forward guidance to price in continues. Many US and London banks adjusting rate hike expectations to 75bp again in respective November policy meetings.
  • Meanwhile, persistent rally in USD Index has extended through the London close, with the greenback hitting new cycle highs of 112.866. Move exacerbated by protracted weakness in GBP (making up around 12% of the USD Index) following the UK mini budget earlier today.
  • Cross asset roundup: stocks weaker (SPX -80 at 3692.0) crude sharply lower (WTI -4.52 at 78.97), as is Gold -23.33 at 1647.97.
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