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Rates, Stocks Finish on Positive Tone After In-Line CPI

US TSYS

Treasury futures see-saw near late session highs after initial gap bid followed in-line CPI read for April, MoM 0.4%, YoY 5.5%, and off-setting CPI figures: higher used car and medical care services vs. lower than expected lodging and airfare items. Late support tied to nascent hopes of a debt ceiling breakthrough that also buoyed stocks.

  • Tsy 10s currently 115-25.5 vs. 115-31 high, yield off 3.4275% low at 3.4502%. Curves steeper but off highs, 2s10s currently +4.186 at -46.584 (-44.525 high).
  • Projected rate cuts for late 2023 are firmer but still off last week's highs: November cumulative -53.3bp (-58.7bp last wk) at 4.544%, Dec'23 cumulative -77.9bp (-84.3bp last wk) at 4.293%, while Jan'24 cumulative is running at -101.8bp at 4.048%.
  • For a technical perspective, initial resistance at 116-12 High May 5, a resumption of gains would open key resistance at 117-01+, the Mar 24 high. This is the bull trigger.
  • Treasury futures had pared gains briefly following the $32B 10Y note auction (91282CHC8) tail: 3.448% high yield vs. 3.437% WI; 2.45x bid-to-cover vs. 2.36x prior. Indirect take-up 67.05% vs. 62.95% prior; direct bidder take-up 19.46% from 19.91% prior; primary dealer take-up falls to 13.04% vs. 17.14% prior.
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