T-Notes Slip Amid Bid In E-Minis, Fed Musings Take Centre Stage

The debate on Fed tightening outlook dominated, after a surprise downshift in the BoC's rate-hike pace fuelled speculation that U.S. policymakers could follow suit sooner than had been expected. A slew of weak earnings reports from big U.S. tech names and unimpressive data outturns earlier this week helped this narrative gain some more traction. Another 75bp rate rise at the next FOMC meeting remains fully priced in, but hawkish bets for the subsequent meetings have moderated over the past week.

• A positive showing from U.S. e-minis kept a lid on core FI. Continued rally in the Hang Seng and resilience in South Korean stock indices lent further support to sentiment, even as equity indices in Japan and mainland China traded narrowly in the red.
• T-Notes ground higher but struggled to penetrate 111-05 on several attempts and eased off into negative territory. The contract last deals -0-02+ at 111-00+. Eurodollars trade 1.0-2.0 ticks lower through the reds.
• Cash Tsy curve runs marginally steeper at typing, with yields last seen 1.1-2.1bp cheaper. The spread on 5-Year/30-Year Tsys remained in inversion territory, despite moving towards the breakeven level through the session.
• Advance Q3 GDP data will provide another key input to the ongoing debate on Fed tightening trajectory. Other data highlights include durable goods and initial jobless claims. The Treasury will auction $35bnworth of 7-Year notes.