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Rate Cut Hopes Kept Alive

US TSYS
  • Treasuries continued to retreat Tuesday on heavy volumes (TYM4 >1.9M) as Europe returned from extended Easter holiday weekend. Treasury curves broadly steepened: 2s10s +6.013 to -33.801 (highest since March 21) as short end rates outperformed.
  • Intermediate to long end rates held near the middle of the day's range following this morning's slightly higher than expected JOLTS job openings at 8.756m (cons 8.73m) in Feb after an downward revised 8.748m (initial 8.86m) in Jan. The ratio to unemployed fell to 1.36x, helped by the strong 0.33m rise in unemployment in Feb.
  • Fed speakers supported short end rates on the day: Cleveland Fed Mester ('24 voter but retiring in June) won't rule out a rate cut in June, while SF Fed Daly said three rate cuts in 2024 is still a "reasonable baseline".
  • In turn, projected rate cut pricing rebounded from morning lows: May 2024 steady at -6.7% w/ cumulative -1.7bp at 5.312%; June 2024 -59.7% vs -53.3% earlier w/ cumulative rate cut -16.6bp at 5.163%. July'24 cumulative at -24.6bp vs -23.6bp earlier, Sep'24 cumulative -41.9 vs. -40.0bp.
  • Wednesday Data Calendar: ADP Jobs, S&P Global US Services/Composite PMIs (final), ISM Services and multiple Fed Speakers through the session. Main focus, however, is on Friday's March employment report, current job gain estimate at +205k.
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