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Key Support Remains Exposed

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Pullback Extends, But Still Looks Corrective in Nature

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FED Remains in Play Post-NFP/ISM Data

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Market Roundup: 30YY Sub 4% Post-PPI

US TSYS
Tsys trade firmer, off post-PPI gap bid highs ahead midday but headed back in that direction as 30YY holds below 4.0% (3.9562% low).
  • Lower than forecasted PPI (MoM +0.2% vs. 0.4% est; YoY +8.0% vs. +8.3% est) saw Tsys extend early rally past last Thursday's post-CPI levels, yield curve mixed, short end flatter (-57.839 low).
  • BLS: The index for final demand goods moved up 0.6 percent in October, the largest advance since a 2.2-percent rise in June. Most of the October increase can be traced to a 2.7 percent jump in prices for final demand energy.
  • FI support scaled back over the next hour as Philly Fed Harker, Fed Gov Cook and lastly Atlanta Fed Bostic offered cautionary opinions/outlooks: Harker: doesn't like to "base policy on a couple headline number", yet sees the Fed "going on hold some point next year". Cook: HAVE TO BE CAREFUL HOW MONETARY POLICY IS WIELDED, Bbg. Bostic: sees "glimmers of hope" that inflation is cooling, but expects more hikes as tighter money has not yet constrained business activity enough to seriously dent inflation.
  • Year end pivot/hike step-down gains traction: Fed funds implied hike for Dec'22 steady at 49.8bp vs 50.9bp earlier, Feb'23 cumulative 84.2bp vs. 86.0bp earlier to 4.697%, terminal funds rate slips to 4.88% in May'23/Jun'23 (5.08% pre-CPI).
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Tsys trade firmer, off post-PPI gap bid highs ahead midday but headed back in that direction as 30YY holds below 4.0% (3.9562% low).
  • Lower than forecasted PPI (MoM +0.2% vs. 0.4% est; YoY +8.0% vs. +8.3% est) saw Tsys extend early rally past last Thursday's post-CPI levels, yield curve mixed, short end flatter (-57.839 low).
  • BLS: The index for final demand goods moved up 0.6 percent in October, the largest advance since a 2.2-percent rise in June. Most of the October increase can be traced to a 2.7 percent jump in prices for final demand energy.
  • FI support scaled back over the next hour as Philly Fed Harker, Fed Gov Cook and lastly Atlanta Fed Bostic offered cautionary opinions/outlooks: Harker: doesn't like to "base policy on a couple headline number", yet sees the Fed "going on hold some point next year". Cook: HAVE TO BE CAREFUL HOW MONETARY POLICY IS WIELDED, Bbg. Bostic: sees "glimmers of hope" that inflation is cooling, but expects more hikes as tighter money has not yet constrained business activity enough to seriously dent inflation.
  • Year end pivot/hike step-down gains traction: Fed funds implied hike for Dec'22 steady at 49.8bp vs 50.9bp earlier, Feb'23 cumulative 84.2bp vs. 86.0bp earlier to 4.697%, terminal funds rate slips to 4.88% in May'23/Jun'23 (5.08% pre-CPI).