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Markets Roundup: Weekly Claims Climb Tempers Rate Hike Chances

US TSYS
  • Treasury futures remain well supported after this morning's higher than expected weekly claims of 261k (largest since Dec '21) vs. 235k est, small up-revision to prior (233k vs. 232k). Little reaction to midmorning Wholesale Trade Sales/Inventories data.
  • Curves have scaled back from early highs, however, as short end rates (2s +2 at 102-19.5) underperforming intermediates to long end (10s at 113-19 12; 30s +20 at 127-04). Currently, 2s10s curve is near flat at -76.476 vs. -71.863 high.
  • This could partially be due to markets expecting increased Treasury bill sales (size and breadth of durations), though latest announcement shows 13- and 26W bills steady at $65B and $58B respectively while 52W bill climbs $2B to $38B.
  • As a result of this morning's post claims rally, projected rate hike chances over the next three meetings have cooled: Fed funds pricing in appr 28% chance of a 25bp hike next week vs. 38.8% earlier, July OR Sep has receded to 77.2% and 64.4% respectively vs. 91.2% and 80.0% earlier. Year end rate cut chances remain soft while Jan'24 has climbed back to fully pricing in a 25bp cut.
  • Stocks, meanwhile, are trading near highs (SPX emini at 4287.0) lead by Consumer Discretionary and IT sector shares. Energy stocks have pared early week gains as crude trades lower (WTI -.68 at 71.85).
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