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New Cycle High For 2Y Yields On UK Woes Spillover

US TSYS
  • Cash Tsys see a sizeable cheapening but nevertheless large outperformance to the huge moves in Gilts with no sign of a stepping back from Chancellor Kwarteng’s push for unfunded tax cuts and less so the politics-induced sell-off in BTPs.
  • The result has been front end yields touching fresh cycle highs of 4.345% although this has since retraced to 4.2779% (+7.7bps), followed by 5YY +8.3bps at 4.062%, 10YY +7.4bps at 3.759% and 30YY +4.2bps at 3.648%.
  • TYZ2 trades 16 ticks lower at 112-04 on above average volumes. The bearish outlook remains, with support eyed at Friday’s low of 111-25 and then 111-08+ (3.0% Lower Bollinger Band), whilst resistance is seen at 114-00 (Sep 22 high).
  • A heavy week for Fedspeak is kickstarted by Collins (’22 voter), Bostic (’24), Logan (’23) and Mester (’22), likely overshadowing the Chicago and Dallas Fed activity indices.
  • Bond issuance: US Tsy $43B 2Y Note auction (91282CFN6) – 1300ET
  • Bill issuance: US Tsy $54B 13W, $42B 26W bill auction – 1130ET

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