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Treasuries Bull Flatten, Fed Beige Book Points to Slowing Economy

US TSYS
  • Treasury futures near late session highs after bell, Fed Beige Book for July supportive amid expectations of slower economic growth tied to election uncertainty, domestic policy, inflation and geopolitical uncertainty.
  • Opaque at times, Fed speak from Richmond Fed Barkin and Fed Gov Waller leaned dovish. “While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Waller said in prepared remarks.
  • TYU4 trades 111-13.5 last (+3) vs. -111-15 session high, nearing initial technical resistance of 111-17+ (1.382 of Apr 25-May 16-29 swing), next level at 111-31 (1.382 proj of the Apr 25 - May 16 - 29 price swing).
  • Curves hold flatter profile with short end lagging late session gains, 2s10s -2.412 at -28.582. As a result, projected rate cut pricing into year end slightly cooler vs. late Tuesday levels (*): July'24 at -6.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -25.7bp (-26.6bp), Nov'24 cumulative -41.1bp (-42.9bp), Dec'24 -63.6bp (-65.4bp).
  • Tsy futures dip slightly then recover (TYU4 111-11.5 last) after $13B 20Y bond auction reopen (912810UB2) comes out on the screws: 4.466% high yield vs. 4.466% WI; 2.68x bid-to-cover vs. prior month's 2.74x.
  • Focus turns to Thursday's Weekly Claims, 10Y TIPS Sale, TIC Flows and upcoming earnings from M&T Bank and Blackstone on Thursday; Fifth Third, Regions Financial, Comerica, American Express and Huntington next Friday.

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