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Tsy Yield Curves Bear Steepen Post-FOMC Minutes

US TSYS
Tsys remain weaker after the bell but off session lows, yield curves bear steepening ( 2s10s gapped to session high of -38.963) following July FOMC minutes release, as market digests comments like:
  • Officials saw risk the Fed could tighten more than necessary; and as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation." Link to minutes:
  • https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220727.pdf
  • Lead quarterly Eurodollar futures EDU2 climbed to session high of 96.675 (+0.025) after the release as market expectations of more than 50bp hike at Sep 21 cool (despite there being ample time and data between now and then).
  • US rates had sold off overnight after higher than expected UK CPI (+0.6% MoM; +10.1 YoY) underscored expectations of further tightening from the BoE.
  • Fast two-way trade on decent volumes after steady July Retail sales read vs. +0.1% est (prior 1.0% revised to +0.8%), but higher in Ex-Auto +0.4% MoM vs. -0.1% est (prior 1.0% revised to +0.9%), ex-Auto/Gas +0.7% vs. 0.4% est and Control Group +0.8% (prior 0.8% revised +0.7%) vs. 0.6% est.
  • Tsy futures gapped back to session lows briefly following weak $15B 20Y bond auction (912810TK4) tails: 3.380% high yield vs. 3.355% WI; 2.30x bid-to-cover vs. last month's 2.65x.
  • The 2-Yr yield is up 2.5bps at 3.2828%, 5-Yr is up 9.5bps at 3.0477%, 10-Yr is up 8.9bps at 2.8931%, and 30-Yr is up 5.8bps at 3.1472%.
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Tsys remain weaker after the bell but off session lows, yield curves bear steepening ( 2s10s gapped to session high of -38.963) following July FOMC minutes release, as market digests comments like:
  • Officials saw risk the Fed could tighten more than necessary; and as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation." Link to minutes:
  • https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220727.pdf
  • Lead quarterly Eurodollar futures EDU2 climbed to session high of 96.675 (+0.025) after the release as market expectations of more than 50bp hike at Sep 21 cool (despite there being ample time and data between now and then).
  • US rates had sold off overnight after higher than expected UK CPI (+0.6% MoM; +10.1 YoY) underscored expectations of further tightening from the BoE.
  • Fast two-way trade on decent volumes after steady July Retail sales read vs. +0.1% est (prior 1.0% revised to +0.8%), but higher in Ex-Auto +0.4% MoM vs. -0.1% est (prior 1.0% revised to +0.9%), ex-Auto/Gas +0.7% vs. 0.4% est and Control Group +0.8% (prior 0.8% revised +0.7%) vs. 0.6% est.
  • Tsy futures gapped back to session lows briefly following weak $15B 20Y bond auction (912810TK4) tails: 3.380% high yield vs. 3.355% WI; 2.30x bid-to-cover vs. last month's 2.65x.
  • The 2-Yr yield is up 2.5bps at 3.2828%, 5-Yr is up 9.5bps at 3.0477%, 10-Yr is up 8.9bps at 2.8931%, and 30-Yr is up 5.8bps at 3.1472%.