Rate Curves Bull Flatten Ahead CPI, Weekly Claims

Session started off with a strong risk on bid that carried through the close, yield curves bull flattening after trading steeper during Asia hours overnight. Some desks sited rising odds of Fed gov Brainard replacing Chairman Powell after "interview" w/ Pres Biden late last wk.

• Contributing to early Curve Flattening: Dealer desks reported central bank selling in 5s, carry-over foreign real$ buying in 10s and decent leveraged$ buying in 30s (30YY falls to 1.7940% low). Light deal-tied selling/rate locks and pre-auction short sets ahead second leg of wk's Tsy supply: $39B 10Y notes.
• Tsy futures slip off highs after $39B 10Y note auction (91282CDJ7) tailed:1.444% high yield vs. 1.430% WI; 2.35x bid-to-cover well below five auction avg: 2.56x. Indirect take-up remains high at 71.01% vs. 71.05% last two auctions; direct bidder take-up falls to 13.80% vs. 17.74% last month while primary dealer take-up bounces to 15.19% vs.1 1.21%.
• Large deferred Eurodollar spd/Block: -20,000 Green Dec'23 at 98.625 (+0.045) vs. +20,000 Gold Dec'25 at 98.34 (+0.080) at 0854:55ET -- positioning for a shorter/shallower rate hike cycle ending by late 2023.
• Wednesday data: CPI and weekly claims a day early due to Thursday Veterans Day holiday closure.
• The 2-Yr yield is down 3.4bps at 0.4088%, 5-Yr is down 4.7bps at 1.07%, 10-Yr is down 5.9bps at 1.4306%, and 30-Yr is down 6.4bps at 1.8172%.