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Markets Roundup: Off Lows, 2s10s Curve Turns Steeper

US TSYS
  • Treasury futures are drifting off recent session lows following the first block buy of the day: +5,000 FVU3 107-06.25, buy through 107-06 post-time offer at 1324:02ET, 107-07.25 last (--18.25). As was the case in EGBs, session moves were largely flow driven, not headline related on the day.
  • Futures opened and continued to extend lows after weekly claims came out lower than expected at 228k vs. 240k est., Philly Fed -13.5 vs. -10 est. Sporadic knee-jerk selling saw front month 10Y futures initially mark 112-09.5 low (-22.5) before bouncing to 112-14 amid moderate two-way trade.
  • Trading desks reported heavy round of selling in 10s into midday: over 15,000 TYU3 extended session low to 112-00 (-1-00). Unexpected consequence, 2s10s curve bounced off the session inverted low of -105.083 (compares to appr 40-year lows tapped in early March and July of -110.89) to -98.818, up +3.169 on the day.
  • Despite the late drift off lows, rate hike projections gain slightly: July running at 96% w/ implied rate of +24bp to 5.318%. September cumulative of +28.2bp at 5.360%, November cumulative of 34.2bp at 5.42%, and December cumulative of 28.8bp at 5.366%. Fed terminal holding at 5.42% in Nov'23.
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