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Market Roundup: Did StL Fed Bullard Preempt Feb FOM Minutes?

US TSYS
Tsys trading firmer at midday, bonds off the lowest level since mid-November tapped overnight (USH3 123-30) currently 124-20. Tsys bounced after early StL Fed Bullard interview on CNBC siphoned some hawkish positioning out of markets ahead of the Feb FOMC minutes release at 1400ET.
  • StL Fed Bullard sees "tough road ahead" on inflation, rates reaching 5.375%, he states "we have a good shot at beating inflation in 2023", while market may be overpricing chances of recession.
  • Equities took positively as well, ESH3 climbing to 4020.0 high before paring gains on Washington Post article saying META to lay off thousands of employees - later rebutted by META's comms director Andy Stone.
  • Yield curves steeper but off highs (2s10s +1.373 at -76.062 vs. -73.312) as short end traded strong: Fed funds implied hike for Mar'23 at 28.9bp (-.7), May'23 cumulative 53.8bp to 5.122%, Jun'23 69.7bp to 5.280%, terminal at 5.335% in Aug'23 vs. 5.37% high.
  • Heavy two-way trade (TYH3>2.3M) driven by quarterly futures rolls from Mar'23 to Jun'23 ahead next Tue First Notice (Jun'23 takes lead). Pre-auction short sets ahead $43B 5Y Note auction at top of the hour.

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