Move Away From Highs Extends On ISM, Before Moving Back To Pre-Release Levels

Tsys briefly extend the move off NFP-inspired highs, with the ISM m’fing prices paid component (far less contractionary than expected and prior) drawing most of the focus.

• The headline ISM m’fing release saw a slightly more benign rate of contraction vs. what was expected, with slower rates of deterioration also noted in the employment reading. Meanwhile rate of contraction in new orders picked up pace at the margins.
• Space generally reverts to close to pre-release levels, cash Tsy yields 2.5bp richer to 7bp cheaper, while TYZ3 is -0-10+ off lows after showing at the softest level since Tuesday (when JOLTS data provided a bid).
• FOMC-dated OIS terminal policy rate pricing little changed from levels flagged earlier, showing at 5.425% come November, with just over 50bp of cuts now priced through June ’24.
• Pre-ISM comments from Fed’s Mester (’24 voter), pointing to a risk management approach to monetary policy (a little dovish given her hawkish history) did little for Tsys.