July 24, 2024 09:21 GMT
Off Highs But Still Firmer Amidst Equity Weakness And Mixed To Softer EU PMIs
US TSYS
- Treasuries pulled away from highs aided by a beat for the flash UK mfg PMI, but mostly keep to earlier strength following equity futures weakness (yesterday’s after-market earnings) before subsequent support from net softer than expected Eurozone flash PMIs (German miss offset a French beat).
- Energy and industrial commodity prices offer a less clear-cut driver today after yesterday’s continuation of broad declines.
- Yesterday’s 2Y auction was particularly strong as investors currently see the Fed cutting in September: largest stop through in recent years (2.1bp), highest bid-to-cover since Aug 2023 (2.85x) and highest non-primary dealer take-up in data going back to 2003.
- The long-end meanwhile reverses yesterday’s late sell-off linked to corporate debt issuance.
- Cash yields are 1-2bp lower on the day, whilst 2s10s sees a mechanical shunt higher to -20bps for fresh highs since January on the new 2Y benchmark, an extension of yesterday’s steepening seen after the auction results.
- TYU4 at 110-29 (+01) is off an earlier high of 110-31 but has remained within yesterday’s range overnight.
- There’s some reluctance to push much higher, after Monday’s low of 110-18+ probed support at the 20-day EMA (110-21+) to open the 50-day EMA (110-08+).
- US flash PMIs at 0945ET come after a particularly light start to the week for data, but with greater on focus on GDP/PCE data over the next two days. The BoC decision at the same time could see some spillover with a second consecutive cut almost fully priced and the broader tone watched.
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