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Retracing Yesterday's ISM Sell-Off, Yellen Updates On Debt Limit

  • Despite Fed rate expectations holding yesterday’s climb, front-end cash Tsys have rallied although they do at least underperform the rest of the curve for a bull flattening. It chips away at yesterday’s significant bear steepening in a move that was driven on by stronger than expected ISM mfg prices paid.
  • Yellen has informed Congress that the Treasury will exhaust funds under the debt limit “potentially as early as June 1” but possibly “a number of weeks later”, whilst McCarthy has accepted to meet with President Biden on May 9 according to CNN.
  • 2YY -1.6bp at 4.124%, 5YY -3.8bp at 3.596%, 10YY -3.4bp at 3.534% and 30YY -2.5bp at 3.783%.
  • TYM3 trades 8 ticks higher at 114-24 on reasonable volumes of 330k. Yesterday’s low of 114-10 tested support at the 50-day EMA of 114-19 with a clear break highlighting a bearish threat which could expose the key near-term 113-30+ (Apr 19 low).
  • Fed: FOMC begins day 1 of 2-day meeting
  • Data: JOLTS Mar (1000ET), Factory orders Mar/durables Mar final (1000ET), Wards vehicle sales Apr
  • Bill issuance: US Tsy $40B 21-Day CMB auction (1130ET)

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