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Risk-On Post-Data, Rate Hike Projections Cool

US TSYS
  • Treasury futures drift near late session highs, well above this morning's knee-jerk bid after PPI +0.1% vs. -0.1% est quickly reversed on weekly claims decline of 12k to 237k vs . 250k est.
  • Curves running mixed: 3M10Y -9.840 at -163.468 (still above late June lows), while 2s10s remains steeper, but off highs (2s10s +3.889 at -85.206 vs. -82.676 high).
  • Despite post-CPI, carry-over support in 10s, medium-term trend remains down and the latest recovery is likely part of a short-term corrective cycle. The contract has cleared the 20-day EMA and attention turns to a key resistance area at the 50-day EMA, at 113-12. A clear break of this average would strengthen a bullish theme. Key support and the bear trigger has been defined at 110-05, the Jul 6 low.
  • In-line with short-end support, rate-hike projections have cooled in later dates: July 26 FOMC is 89% w/ implied rate of +22.2bp to 5.298%. September cumulative of +25.2bp at 5.33%, November cumulative of 29.3bp at 5.364%, December cumulative slips to 21.5bp vs. 31.7bp late Tuesday. Fed terminal has slipped to at 5.365% in Nov'23.
  • Little react to San Fran Fed Pres Mary Daly on CNBC earlier: "It's too early to say that we can declare victory on inflation," she said. "This month of data is very positive, I hope it's part of a downward trend in inflation. But I remain in a wait-and-see mode on that because I remain resolute to bring inflation back down to 2%." Reminder, Fed enters policy blackout tomorrow at midnight.
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