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Treasuries Revert Back To Post-CPI Levels As Volumes Fizzle Out

US TSYS
  • Treasuries have recently touched new lows on the day for 2s and 5s, but it doesn't materially alter a large bear steepening on the day, between 4.5-11.5bp cheaper as the long end of the curve shifts back to post-US CPI levels. It’s attributed at least in part to little new news out of the Israel-Hamas conflict, which has helped see a notable pullback from Friday’s highs, although geopolitical tensions continue with Iran’s minister of foreign affairs warning the probability of the conflict spreading to other fronts is approaching the avoidable stage.
  • Limited data has helped support some of this steepening, with a small beat for the Empire manufacturing survey for October and more notably another month with its six-month ahead metric at pre-pandemic level to support a softer landing thesis.
  • TYZ3 has broadly traded sideways in recent hours, currently at 107-06 (-16+) off the low of 107-04 that stopped just short of support at 107-02+ (Oct 10 low) with firmer focus on 106-03+ (Oct 4 low). Having started off with decent relative volumes heading into the NY crossover, volumes have since been more lackluster, only just ticking over 1M for the day.
  • Tomorrow sees a more notable docket, with retail sales for Sep, Fedspeak from Williams, Bowman, Barkin and Kashkari and a picking up of earnings releases including Johnson & Johnson, BofA and GS before the cash equity open.
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