US TSYS
- Treasuries have seen some downward pressure late in the session but hold onto gains for the day (albeit only just in the case of 2s).
- Core PCE inflation was slightly softer than expected but still solid trend rates for supercore inflation appear to have helped anchor Fed rate expectations with markets only willing to pare so much of Wednesday’s reaction to a hawkish Fed.
- Polymarket shows odds of a government shutdown as having tilted from 75% overnight to 45% currently.
- Cash yields are 0.8-5.6bps lower, with the belly leading declines after being dragged higher by a particularly weak 5Y TIPS auction yesterday with a 6.7bp tail.
- 2s10s of 21.2bps (-3.8bp) has seen a sizeable pullback away from yesterday’s fresh ytd high of 28bps, potentially in profit taking for a successful week for steepeners.
- 10Y yields have topped out this week at 4.5923% (currently 4.158%), easily through the mid-Nov high of 4.50% for highs since May.
- TYH5 trades at 109-01 having pulled back from an earlier high of 109-08+. It consolidates an increase away from support at 108-16+ (Dec 19 low) but hasn’t troubled resistance at 110-07+ (20-day EMA).
- Fed Funds implied rates show 2bp of cuts for Jan, a cumulative 26bp for June and 39bp for Dec.
- Next week sees Monday start with durable goods orders and new home sales, having been pulled forward from Tuesday.
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