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Treasuries Pare Further Gains To Broadly Consolidate Post JOLTS Rally

US TSYS
  • Front end Treasuries have pared more than half of their gains seen on surprise downward revisions for GDP growth and core PCE inflation in Q2, along with ADP missing shortly beforehand albeit with a caveat of an upward revision.
  • Yields are 0.5-1.5bp lower on the day, ultimately consolidating yesterday’s large rally on weaker than expected JOLTS and Conference Board boards ahead of tomorrow’s core PCE for July and Friday’s NFP report.
  • Curves had seen a further steepening intraday, with 2s10s touching -72.9bps, but are now back at -76.5bps for only +0.5bps on the day, with the long-end reluctant to pare gains after weaker than expected growth.
  • TYZ3 trades mid-range at 110-27 (+01) off highs of 111-03+, breaching resistance at the 20-day EMA to next open 111-13+ (Aug 11 high). The trend direction remains lower however, with support at 109-18+ (Aug 25 low).
  • Near-term Fed Funds implied rates have reversed most of the hit from the softer US data but are down notably on pre-JOLTS levels. They show +3bp for Sept and a cumulative +12bp for Nov to 5.45% terminal, the latter down 5.5bps from pre-JOLTS levels. Cuts from terminal are seen at 49bp to Jun’24 and 121bp to Dec’24.
  • Tomorrow sees a heavy US docket including the July PCE report, MNI Chicago PMI, challenger job cuts and weekly jobless claims data, along with Fedspeak from Bostic and Collins.
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