Richer, Eyes On CPI

Tsys have been happy to richen as European participants look ahead to U.S. CPI data, expectations surrounding European issuance (good demand at the Irish syndication foreseen and a step down in the pace of wider IG supply vs. the last couple of days) are aiding the bid.

• TYH4 is +0-07+ at 112-03+, 0-02 off the peak of its 0-09+ range, with early ’24 daily highs presenting intermediate levels of resistance for bulls.
• Yields run 2-4bp lower across the curve, with a flattening bias observed.
• The monthly CPI reading dominates the NY docket, our full preview of that release can be found here.
• FOMC-dated OIS shows ~143bp of cuts through ’24 at present, with ~17.5bp of easing priced through the March FOMC.
• Outside of the CPI release we will see 30-Year Tsy supply and Fedspeak, weekly jobless claims and real average earnings data in NY hours.
• Fedspeak from Mester & Barkin is also due.
• A quick reminder that Wednesday saw NY Fed President Williams note that “In its plans, the FOMC said that to ensure a smooth transition it intends to slow and then stop the decline in the size of the balance sheet when reserve balances are somewhat above the level it judges to be consistent with ample reserves.10 So far, we don’t seem to be close to that point.” This came across more hawkishly than ex-SOMA chief and current Dallas Fed President Logan’s weekend comments on balance sheet matters, although her expertise and the mention of the need to consider such matters in the Dec FOMC minutes likely insulated the Tsy space from cheapening post-Williams.