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US TSYS: Nascent Recovery Gives Way Pre-FOMC

US TSYS
USBulletMarketsFixed Income BulletsNorth America

Treasuries were mostly flat Tuesday, with little apparent conviction ahead of the FOMC meeting.

  • A sell-off in UK Gilts saw Treasuries weaken overnight, with cash yields rising ~3bp more or less in parallel across the curve.
  • After futures dipped through support at 109-20 (Nov 20/21 low), reaching a low of 109-17, Treasuries saw a modest recovery after US retail sales data came in more or less in line, and industrial production was on the weak side (the Atlanta Fed's GDP nowcast was downgraded 0.2pp for Q4 to 3.1% following the data).
  • There was a final pullback of a few ticks into the close on elevated volumes that saw end basically unchanged for the session, and with no apparent trigger this appeared more like anticipation of Wednesday's FOMC decision.
  • There was little reaction to a 20Y auction that tailed 1.5bp, but was at least better than November's much poorer sale.
  • The cash curve was almost entirely unchanged on the day, with 5s and 10s yields unchanged and 2s / 30s yields very slightly lower.
  • Analysts are unanimous in expecting a 25bp rate cut from the FOMC Wednesday, but there are varying opinions on the path of rates ahead and the number of cuts that the Fed will signal in its Dot Plot for 2025. We go through what to watch for in detail in our MNI Fed Preview.
  • Latest levels: The Mar 25 T-Note future is down 1.5/32 at 109-26, having traded in a range of 109-17 to 109-31.5. The 2-Yr yield is down 0.6bps at 4.2426%, 5-Yr is unchanged at 4.2571%, 10-Yr is unchanged at 4.3967%, and 30-Yr is down 1.1bps at 4.5876%.
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Treasuries were mostly flat Tuesday, with little apparent conviction ahead of the FOMC meeting.

  • A sell-off in UK Gilts saw Treasuries weaken overnight, with cash yields rising ~3bp more or less in parallel across the curve.
  • After futures dipped through support at 109-20 (Nov 20/21 low), reaching a low of 109-17, Treasuries saw a modest recovery after US retail sales data came in more or less in line, and industrial production was on the weak side (the Atlanta Fed's GDP nowcast was downgraded 0.2pp for Q4 to 3.1% following the data).
  • There was a final pullback of a few ticks into the close on elevated volumes that saw end basically unchanged for the session, and with no apparent trigger this appeared more like anticipation of Wednesday's FOMC decision.
  • There was little reaction to a 20Y auction that tailed 1.5bp, but was at least better than November's much poorer sale.
  • The cash curve was almost entirely unchanged on the day, with 5s and 10s yields unchanged and 2s / 30s yields very slightly lower.
  • Analysts are unanimous in expecting a 25bp rate cut from the FOMC Wednesday, but there are varying opinions on the path of rates ahead and the number of cuts that the Fed will signal in its Dot Plot for 2025. We go through what to watch for in detail in our MNI Fed Preview.
  • Latest levels: The Mar 25 T-Note future is down 1.5/32 at 109-26, having traded in a range of 109-17 to 109-31.5. The 2-Yr yield is down 0.6bps at 4.2426%, 5-Yr is unchanged at 4.2571%, 10-Yr is unchanged at 4.3967%, and 30-Yr is down 1.1bps at 4.5876%.