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Rates Quietly Rebound, Yld Curves Hold 22 Year Inverted Lows

US TSYS

Tsy futures drifting near modest session highs after the bell - wide range on decent volume (TYU2>1.6M) after rebounding steadily off midmorning lows. Yield curves still near inverted lows not seen since late 2000: 2s10s currently -6.205 ast -36.662 vs. -37.202 low.

  • Hawkish Fed messaging continues: StL Fed Bullard on CNBC earlier echoing Daly and Mester's messaging: Fed job "nowhere near" complete in reining in inflation while needing months of "convincing evidence" that infl has peaked.
  • That said, SF Fed Daly clarified/softened her view slightly saying 50bp hike in Sep a "reasonable thing to do." Mkts appeared to ignore MN Fed Kashkari comments after the close: inflation fight a bigger priority than recession, while market bets on rate cuts are very unlikely.
  • Meanwhile, US Tsy annc fourth consecutive reduction in its quarterly sales of longer-term debt as borrowing needs diminished and signaled a pause going forward. Reductions in short-end auction sizes was not widely expected (2s, 3s), the rest was more or less in line by the looks of it.
  • Data on tap for Thursday: Challenger Job Cuts YoY, Initial Jobless Claims (260k est), Continuing Claims (1.383M est). Larger focus on Friday's July employment report (+250k est vs. +372K prior).
  • Current cross assets: spot Gold rebounds +$5.39 (0.31%) at $1765.35, Crude weaker: WTI -$3.57 (-3.78%) at $90.81, stocks near recent session highs ESU2 +72.5 points (1.77%) at 4160.75.
  • Currently, 2-Yr yield is up 4.3bps at 3.0937%, 5-Yr is up 0.7bps at 2.8599%, 10-Yr is down 1.6bps at 2.7319%, and 30-Yr is down 4.8bps at 2.9581%.
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Tsy futures drifting near modest session highs after the bell - wide range on decent volume (TYU2>1.6M) after rebounding steadily off midmorning lows. Yield curves still near inverted lows not seen since late 2000: 2s10s currently -6.205 ast -36.662 vs. -37.202 low.

  • Hawkish Fed messaging continues: StL Fed Bullard on CNBC earlier echoing Daly and Mester's messaging: Fed job "nowhere near" complete in reining in inflation while needing months of "convincing evidence" that infl has peaked.
  • That said, SF Fed Daly clarified/softened her view slightly saying 50bp hike in Sep a "reasonable thing to do." Mkts appeared to ignore MN Fed Kashkari comments after the close: inflation fight a bigger priority than recession, while market bets on rate cuts are very unlikely.
  • Meanwhile, US Tsy annc fourth consecutive reduction in its quarterly sales of longer-term debt as borrowing needs diminished and signaled a pause going forward. Reductions in short-end auction sizes was not widely expected (2s, 3s), the rest was more or less in line by the looks of it.
  • Data on tap for Thursday: Challenger Job Cuts YoY, Initial Jobless Claims (260k est), Continuing Claims (1.383M est). Larger focus on Friday's July employment report (+250k est vs. +372K prior).
  • Current cross assets: spot Gold rebounds +$5.39 (0.31%) at $1765.35, Crude weaker: WTI -$3.57 (-3.78%) at $90.81, stocks near recent session highs ESU2 +72.5 points (1.77%) at 4160.75.
  • Currently, 2-Yr yield is up 4.3bps at 3.0937%, 5-Yr is up 0.7bps at 2.8599%, 10-Yr is down 1.6bps at 2.7319%, and 30-Yr is down 4.8bps at 2.9581%.