Treasury Futures Rally On Soft CPI, Pare Gains On Cautious Powell

Treasury futures rallied on the back on a softer-than-expected US CPI print before giving back some of those gains after Chairman Powell stated the "economic outlook is uncertain" while the Fed remains "highly attentive to inflation risks. Today's lower CPI shows progress, helping building confidence - it's still not enough to warrant looser policy at this time.

• Treasury futures rallied back above pre-NFP levels, before giving back about half of the move. The TUU4 contract hit highs of 102-10, before closing +0-05¾ at 102-05⅛, while TYU4 finished +0-24+ at 110-10
• The rally in treasuries overnight breached a number of short-term resistance points, looking at technical levels for TYU4, initial support is at 109-00+ (June 10 lows), with the 108-27+(Jun 3 lows) the next target. While to the upside initial resistance is at 110-21+ (Jun 12 high) above here we target 110-27+ (1.00 proj of the Apr 25 - May 16 - 29 price swing)
• Cash treasury curve traded tighter, better buying in the 3-7yr part of the curve. The 2Y -8.2bps to 4.752%, 7Y -10.2bps to 4.308%, the 10Y -8.8bps at 4.316% while the 2y10y was -0.788 at -44.00.
• (MNI FED WATCH) Seeking Confidence; Divided Over 1 or 2 Cuts - (See Link)
• Rate cut projections recede vs. pre-FOMC levels (*): July'24 at -10% (-14%) w/ cumulative at -2.5bp (-3.8bp) at 5.302%, Sep'24 cumulative -17bp (-20.9bp), Nov'24 cumulative -26.8bp (-31.7bp), Dec'24 -45.5bp (-50.7bp).
• Looking ahead, PPI Final Demand, weekly jobless claims and $22B 30Y Bond auction reopen