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PPI Lower Than Expected, 30Y Bond Sale Tails

Yield curves continue to steepen off 22 year inverted lows (2s10s tapping -33.863 high, at -35.089 +8.642 after the bell) w/ carry-over selling in long as 30YY tapped 3.1877 high. Chunky block sales in 5s, 30s and 30Y Ultras adding to weaker tone ahead next week sees Tsy 20Y bond supply, retail sales anticipated to be strong
  • Short end holding onto cooler inflation (50bp hike over 75bp in Sep) after lower than expected PPI today, final demand inflation surprisingly fell -0.5% M/M (cons +0.2%), pushing the annual rate down from 11.3% to 9.8% Y/Y (cons 10.4%).
  • Tys extend lows after $21B 30Y auction (912810TJ7) tails: 3.106% high yield vs. 3.092% WI; 2.31x bid-to-cover vs. 2.44x the prior month. Indirect take-up recedes to 70.65% vs. 73.20% in Jul; direct bidder take-up climbs to 18.51% vs. 16.34% prior; primary dealer take-up 10.84% vs.14.46%.
  • Cross asset update: Stocks have trimmed gains, rotating around steady: SPX eminis currently trades -0.75 (-0.02%) at 4209.25; DJIA +19.59 (0.06%) at 33328.18; Nasdaq -72.2 (-0.6%) at 12782.35. Spot Gold little weaker at 1785.53 -6.85; Crude firmer (WTI +2.02 at 93.95) after reports of a leak at Fourchon forced Shell and Chevron to shut off near half dozen fields.
  • Data on tap for Friday: Import/Export prices, University of Michigan Sentiment (52.5 est vs. 51.5 prior).
  • Currently, 2-Yr yield is up 0.7bps at 3.2206%, 5-Yr is up 6bps at 2.9816%, 10-Yr is up 9.8bps at 2.8785%, and 30-Yr is up 13.3bps at 3.1656%.

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