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Market Roundup: Mixed Data, Curve Flattener Unwinds

US TSYS

Improved volumes (TYH3>320k) not indicative of market depth with Tsys see-sawing off early session highs, extend recent session lows following midmorning data:

  • Richmond Fed Index much stronger than expected at +1 vs -10 est.
  • Pending Home Sales much weaker than expected at -4.0% MoM vs. -1.0% est (YoY -38.6% vs -36.7% prior).
  • Carry-over curve steepening pretty consistent, however, 2s10s +4.156 at -49.789, least inverted lvl since mid-November - hearing fair amount of unwinds in crowded flattener positions going into year end.
  • Fed funds futures have the policy rate peaking at under 5% by mid-'23 and then receding to around 4.5% by year-end - expectation of rate cuts in late 2023 potentially overpriced.
  • Expect to see further market swings and dwindling volumes as week progresses into year end squaring.
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