Rally On Reassessment Of Fiscal Progress

Treasuries bounced off lows as traders reassessed the likelihood of a fiscal breakthrough in Washington.

• With expectations of a White House - House of Reps agreement over further COVID stimulus reaching fever pitch, Speaker Pelosi dashed expectations, characterizing both sides as being "way off" on some issues (though "closer" on others). Talks between Pelosi and Sec Mnuchin at 1300ET seen as potentially the last chance for a deal.
• Against this backdrop, front Tsys rallied 12 ticks from session lows, having weakened earlier following decent jobless claims data /higher-than-expected core PCE inflation / rallying equities. Lower-than-expected Sep ISM did help fuel the rally, despite signs of incipient supply-push inflation.
• As we await further news from D.C., attention closely paid to Friday's payroll figures.
• Curve trades mixed, with the long end underperforming. The 2-Yr yield is unchanged at 0.127%, 5-Yr is down 0.6bps at 0.2705%, 10-Yr is down 0.2bps at 0.6824%, and 30-Yr is up 0.9bps at 1.4637%.
• Dec 10-Yr futures (TY) up 0.5/32 at 139-17.5 (L: 139-06.5 / H: 139-19)