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Treasury Futures Lower, FOMC Cautious On Cuts

US TSYS

TYH4 is currently trading at 109-19+, down - 00+ from New York closing levels

Treasury futures drifted towards session lows into Wednesday close, as markets digested the January FOMC minutes as focus on policy maker concern of cutting rates too soon vs. waiting too long took precedent as rates clung near lows.

  • Mar'24 10Y futures currently 109-20, vs 109-18 low, a large flattener block posted at 1032:32ET adding to dip in the short end to intermediates: -35,000 TUH4 102-01.38, post time offer, DV01 $1,337M vs. +14,500 UXYH4 113-25.5, buy through 113-23 post time offer, DV01 $1.328M.
  • Initial technical support holds at 109-17/16+ (50.0% of Oct 19 - Dec 27 climb / Low Feb 14), initial technical resistance sits at 110-17.5 (Feb 15 high).
  • Yield curves were slightly flatter on Wednesday, 2Y yield is +5.4bps higher at 4.66%, the 10Y yield is +4.3bps higher at 4.319%, while the 2s10s -1.052 at -34.952.
  • Projected rate cut pricing are consolidating from Wednesday levels; March 2024 chance of 25bp rate cut currently -6.8% vs. -9.6% earlier w/ cumulative of -1.7bp at 5.312%; May 2024 at -26.6% vs. -30.0% w/ cumulative -8.3bp at 5.245%; June 2024 -60.5% vs. -64.9% w/ cumulative cut -23.5bp at 5.094%. Fed terminal at 5.33% in Feb'24.
  • Looking ahead: Chicago Fed Nat Activity Index, Jobless Claims, S&P Global US PMI & Existing Home Sales
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