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Modest Twist Steepening Awaiting FOMC

US TSYS
  • Cash Tsys trade with a twist steepening, pivoting after 5s, with the front end to belly seeing an intraday rally towards levels seen late in yesterday’s session after bank shares fell on news that Banc of California is in advanced talks to buy PacWest, before selling off into the close.
  • Today’s FOMC decision is clearly in focus, with implied rates firming marginally for near-term meetings but with a modest increase in 2024 rate cuts supporting the small rally on the day.
  • 2YY -0.6bp at 4.868%, 5YY -0.2bp at 4.148%, 10YY +1.0bp at 3.894% and 30YY +1.8bp at 3.947%.
  • TYU3 trades 5 ticks higher at 111-24+ in a narrow 7+ tick range and well within yesterday’s range, whilst volumes are subdued at just over 200k. The contract appears to be in retracement mode, with initial support seen at yesterday’s low of 111-17+ after which lies 111-11 (61.8% retrace of Jul 7-18 rally), whilst resistance is seen at 112-17+ (Jul 24 high).
  • Data: Whilst clearly secondary on the day, new home sales for Jun (1000ET) are of interest after surging 12% in May, plus we also get the usual weekly MBA mortgage data (0700ET).
  • Note/bond issuance: US Tsy $24B 2Y FRN (1130ET)
  • Bill issuance: US Tsy $46B 17-W bills (1130ET)

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