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Treasury Curve Bear Steepens On Strong Consumer Confidence, Heavy Supply

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Treasuries have seen a sizeable bear steepening today, driven by stronger than expected Conference Board consumer confidence (despite a weak labor differential) and then more notably sizeable tails for double 2Y and 5Y auctions with their particularly low bid-to-cover metrics (lowest since Nov’21 and Feb’21 respectively).

  • Treasury futures were lower on Tuesday, TU initially rallied heading into the US session hitting a high of 101-17.75 before a sharp reversal saw the contract fall to 101-13.625, support now holds at 109-09.75 and the YTD lows, TY fell (-13) to 108-09+ clearing initial support, with the next supports at 108-06 (May 3 low).
  • Cash treasury curve bear-steepened on Tuesday, yields were 3-10bps higher, the 2Y +3bps to 4.976% has cleared pre-payroll levels, while the 10Y +8.5bps at 4.55% easily cleared 4.5% and now trades at the highest levels since may 3 payrolls, the 2y10y was +5.474 at -43.072
  • Kashkari (non-voter) earlier saying he doesn’t think anyone has taken rate increases off the table, albeit with him seeing quite low odds of a hike, had little immediate impact.
  • Fed Funds implied rates have lifted to show just 19bp of cumulative cuts priced for Nov and 32bp for Dec.
  • Looking ahead; MBA Mortgage Applications, Richmond Fed Manufacturing Index & the Federal Reserve Releases Beige Book, while there will be continued supply with a $44b 7yr auction.
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Treasuries have seen a sizeable bear steepening today, driven by stronger than expected Conference Board consumer confidence (despite a weak labor differential) and then more notably sizeable tails for double 2Y and 5Y auctions with their particularly low bid-to-cover metrics (lowest since Nov’21 and Feb’21 respectively).

  • Treasury futures were lower on Tuesday, TU initially rallied heading into the US session hitting a high of 101-17.75 before a sharp reversal saw the contract fall to 101-13.625, support now holds at 109-09.75 and the YTD lows, TY fell (-13) to 108-09+ clearing initial support, with the next supports at 108-06 (May 3 low).
  • Cash treasury curve bear-steepened on Tuesday, yields were 3-10bps higher, the 2Y +3bps to 4.976% has cleared pre-payroll levels, while the 10Y +8.5bps at 4.55% easily cleared 4.5% and now trades at the highest levels since may 3 payrolls, the 2y10y was +5.474 at -43.072
  • Kashkari (non-voter) earlier saying he doesn’t think anyone has taken rate increases off the table, albeit with him seeing quite low odds of a hike, had little immediate impact.
  • Fed Funds implied rates have lifted to show just 19bp of cumulative cuts priced for Nov and 32bp for Dec.
  • Looking ahead; MBA Mortgage Applications, Richmond Fed Manufacturing Index & the Federal Reserve Releases Beige Book, while there will be continued supply with a $44b 7yr auction.