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Treasuries Near Late Highs, Discounting June PPI & Up-Revisions

US TSYS
  • Reversing the initial negative reaction to this morning's PPI data, Treasury futures look to finish mildly higher, at or near late session highs Friday as as economists deemed the data as more mixed than the initial hawkish reaction warranted.
  • The Sep'24 10Y contract currently trades +2.5 at 111-07.5 near initial technical resistance is at 111-10+ (High Jul 8) followed by 111-13 (High Mar 25). Clearance of this hurdle would open 111-31, a Fibonacci projection. Curves are bull steepened with 2s10s +3.251 at -27.456, 5s30s +1.557 at 29.122.
  • In turn, projected rate cut pricing into year end look firmer vs. early Friday (*): July'24 at -6.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -25.2bp (-24.1bp), Nov'24 cumulative -41.4bp (-38.5bp), Dec'24 -62.9bp (-59.6bp).
  • Treasuries gapped lower after higher than expected PPI Final Demand MoM (0.2% vs. 0.1% est, with prior PPI up-revised to 0.0% from -0.2%), YoY (2.6% vs. 2.3% est, 2.2% prior).
  • The Sep'24 10Y contract traded down to 110-25.5 low (-11.5), well above initial technical support of 110-07+/109-31 (20- and 50-day EMA values) before consolidating and reversing course.
  • Futures inched higher after the latest UofM data came out near steady to lower than expected (current Conditions 64.1 vs. 66.0 - the lowest since late 2022) while inflation expectations come out in-line to slightly lower than expected with both 1Y and 5-10Y at 2.9%.
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