Steady After Yesterday’s Bull-Steepening

TYZ3 is currently trading at 109-18, +0-01 from NY closing levels.

• Yesterday US tsys bull-steepened, with yields 3-12bps lower across benchmarks.
• The driving force was Governor Waller leaning dovish by touting potential cut timings. In the Q&A, Waller suggested that if inflation continues to cool for maybe three to five months, the Fed could lower the policy rate.
• Governor Bowman’s reiteration that she continues to expect the need for a further hike held little sway.
• Fed Fund futures priced an additional 10bps of easing for next year, taking it to a cumulative 100bps.
• The 10-year fell 7bps to 4.32%, not seen since September, despite the cheapening impulse from the largest tail (2.1bps) for a 7Y tsy auction since Nov 2022.
• Today sees the second Q3 GDP release including core PCE before Fedspeak from Cleveland Fed’s Mester (’24 voter) on financial stability and the Fed’s Beige Book.