Treasury Futures Edge Lower On Powell's Hawkish Note On Inflation

Treasuries are trading near late session lows, following Fed Chairman Powell's "lack of further progress on inflation" comment as he participated in a moderated chat with BoC head Macklem in the afternoon.

• Jun'24 10Y futures extended session low to 107-13.5, nearing technical support of 107-07+, before bouncing back to 107-24, trade desks citing Middle East tensions as Israel news reports War Cabinet has decided to strike back at Iran after the weekend drone attacks. Futures drifted lower post NY close with the 10Y, - 02+ at 107-19.
• Looking at technical levels: Initial support lays at 107-16+ (2.50 proj of Dec 27 - Jan 19 - Feb 1 price swing), a break here would open a move to 107-07+ (76.4% of the Oct - Dec ‘23 bull leg). While to the upside resistance holds at 108-25+ (Apr 12 high), a break back above here would open up 109-02/26+ (Apr 8 low / Apr 10 high)
• Cash Treasury curve twist-steepened on Tuesday yields were 4-9bps higher, with the curve pivoting at the 7yr. The 2Y yield was +6.7bps at 4.987%, 10Y +6.6bp to 4.667%, while the 2y10y was unchanged at -32.185.
• Overnight data included lower-than-expected Building Permits (1.458M vs. 1.510M est), and Housing Starts (1.321M vs. 1.485M est), while Industrial Production MoM (0.4% vs. 0.4% est, prior up-revised to 0.4% from 0.1%) and Capacity Utilization (78.4% vs. 78.5% est, prior up-revised to 1.2% from 0.8%) were in line with expecations.
• Looking ahead: Beige Book, TIC Flows and more Fed speakers later in the evening: Cleveland Fed Mester on a Federal Reserve update (Q&A) at 1730ET, Fed Gov Bowman IIF Global Outlook Forum (no text, Q&A) at 1915ET.