Tsy Futures Eye Key Support Ahead Of PCE Data

Treasuries weakened overnight Friday ahead of PCE data, with bear steepening in the cash curve.

• Treasuries were under pressure for most of the overnight session, with March TY futures falling through Thursday's 114 -14 low to 114-12; key support comes in at 114-09+ (Jan 17 low).
• The 10Y segment is underperforming on the cash curve , with the 2-Yr yield up 3.5bps at 4.2176%, 5-Yr +5.7bps at 3.65%, 10-Yr +6.2bps at 3.5571%, and 30-Yr +4.2bps at 3.6812%.
• Though there were few discernable drivers for the move, higher-than-expected Tokyo inflation weakened JGBs, weighing down global counterparts. Broadly speaking, some cautions is building ahead of a very busy schedule next week, which includes multiple key central bank decisions including the ECB and Fed.
• Ahead of next Wednesday's FOMC decision, an implied hike of 26bp is priced, with a cumulative 46bp through the March meeting and 57-58bp through the cycle top in June. End-2023 pricing has ticked up a couple of basis points but still points to 45bp of cuts by the Dec FOMC.
• Focus this morning (for both FOMC participants and the market) is on the December personal income/spending/PCE prices release, with the core deflator seen picking up slightly to 0.3% M/M vs 0.2% in Nov (though slowing Y/Y to 4.4% from 4.7%).
• Relatively less attention will be paid to pending home sales data and the UMichigan survey.