Treasury Futures Weaker But Off Lows, Little React to FOMC Minutes

Treasury futures largely mirrored moves in EGBs during crossover, trading weaker after higher than expected inflation data via UK CPI, before erasing some of those losses as the US session progressed. There was little in the way of a reaction to the FOMC minutes or existing home sales

• Jun'24 10Y futures closed the day down (- 06+) at 109-01, but well off session lows of 108-28+, we have opening up +01 from NY closing levels at 109-02.
• Despite the latest pullback in Treasuries, the short-term trend condition remains bullish. Support now holds at 108-28 (20-day EMA), a break below here would see us look to test 108-15 (May 14 low), while to the upside initial resistance holds at 109-31+ (May 16 high/Bull trigger).
• The treasury bear-flattened on Wednesday, with yields 4bps higher to 1bp lower, the 2Y yield +4bps at 4.869%, 10Y +1bps to 4.422%, while the 2y10y -3.085 at -44.953
• US data: Existing home sales miss in April at 4.14m (cons 4.23m) after an upward revised 4.22m in March (initial 4.19m). The latest profile leaves sales -1.9% M/M in April after a smaller than first thought decline of -3.7% M/M in March, still retracing the surprise 9.5% jump in Feb.
• FOMC minutes: “Participants noted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum, and assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2%,” the minutes said. Some officials also appeared willing to contemplate interest rate increases if conditions appear to worsen.
• Rate cut projections are slightly lower vs. late Tuesday levels (*): June 2024 at -5% w/ cumulative rate cut 0bp at 5.323%, July'24 at -16.0% (-20%) w/ cumulative at -5.2 (-6.3bp) at 5.283%, Sep'24 cumulative -17.8bp (-19.9bp), Nov'24 cumulative -25.6bp (-27.6bp), Dec'24 -40bp (-43.7bp).
• Looking ahead: Chicago Fed Nat Activity Index, Jobless Claims & S&P Global US PMI