Rallies Sold Into

European and UK spill over limits any early London rallies in Tsys, with TY futures biased back towards Asia-Pac lows.

• That contract last shows -0-06 at 109-10 (109-09 to 109-19 range), while volume is skewed higher by roll activity.
• Initial technical support levels are in the previous bullet.
• Cash Tsy yields are 1.5-3.5bp higher with 5s under the most pressure and the broader curve bear flattening.
• Cash Tsys were closed in Asia-Pac hours on the back of a Japanese holiday.
• Weakness in crude oil futures is not having a meaningful impact on core global FI markets.
• A ~$195K DV01 FV block seller was seen in Asia hours.
• Pushback from the Fed re: the need for imminent cuts continues to dominate headline flow.
• Goldman Sachs have subsequently pushed their call for the first Fed cut to June from May, with their terminal rate call unchanged, sitting in the 3.25-3.50% target range.
• FOMC-dated OIS currently shows ~19.5bp of cuts through the June ’24 FOMC meeting, leaning towards, but not fully pricing, a 25bp cut.
• Further out, the first 25bp cut is more than fully discounted come the end of the July ’24 FOMC, with ~77bp of cuts priced over ’24.
• That leaves Goldman’s ’24 cutting view as a little more aggressive than market pricing.
• The median dot in the Fed’s Dec SEP showed 3 cuts in ’24.
• The U.S. docket is slim to finish the week.