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Partial Retracement Of Post-FOMC Bull Steepening

US TSYS
  • Cash Tsys bear flatten in a partial retracement of yesterday’s surge on the FOMC announcement and in particular Powell’s press conference.
  • The net impact remains one of a sizeable bull steepening though, with front-end yields down 12bps since shortly before the policy announcement compared to long-end yields down 4bps. It leaves 2s10s at 27bps, the high of the past couple weeks but within the wide range of moves from early April when it swung from -10bps to above 40bps.
  • With 10Y inflation breakevens rising on the dovish reaction to the presser, real yields have carried the brunt of the decline in yields, currently at 7bps off highs of ~20bps yesterday. That said positive real yields remain rare in the post-pandemic world, only seen consistently this week.
  • 2YY +4.9bps at 2.691%, 5YY +3.6bps at 2.948%, 10YY +2.2bps at 2.956% ad 30YY unchg at 3.035%.
  • TYM2 is down 12 ticks at 118-25 on slightly above average volumes. Support is eyed at the bear trigger of 118-04+ (May 3/4 low) whilst resistance is seen at the 20-day EMA of 119-28.
  • Data: Preliminary Q1 productivity and ULCs (0830ET) should be the pick of today’s data, with eyes ahead on tomorrow’s payrolls.
  • Bill issuance: US Tsy $35B 4W, $30B 8W bill auctions (1130ET)
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  • Cash Tsys bear flatten in a partial retracement of yesterday’s surge on the FOMC announcement and in particular Powell’s press conference.
  • The net impact remains one of a sizeable bull steepening though, with front-end yields down 12bps since shortly before the policy announcement compared to long-end yields down 4bps. It leaves 2s10s at 27bps, the high of the past couple weeks but within the wide range of moves from early April when it swung from -10bps to above 40bps.
  • With 10Y inflation breakevens rising on the dovish reaction to the presser, real yields have carried the brunt of the decline in yields, currently at 7bps off highs of ~20bps yesterday. That said positive real yields remain rare in the post-pandemic world, only seen consistently this week.
  • 2YY +4.9bps at 2.691%, 5YY +3.6bps at 2.948%, 10YY +2.2bps at 2.956% ad 30YY unchg at 3.035%.
  • TYM2 is down 12 ticks at 118-25 on slightly above average volumes. Support is eyed at the bear trigger of 118-04+ (May 3/4 low) whilst resistance is seen at the 20-day EMA of 119-28.
  • Data: Preliminary Q1 productivity and ULCs (0830ET) should be the pick of today’s data, with eyes ahead on tomorrow’s payrolls.
  • Bill issuance: US Tsy $35B 4W, $30B 8W bill auctions (1130ET)