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Tsy Yields Retreat After FOMC Leave Rates Steady

US TSYS
  • Tsy futures near highs after the bell, Dec'23 10Y at 107-00.5 vs. 107-04 high(+30.5), 10Y yield -.1693 to 4.7614% after the FOMC left rates unchanged for the second consecutive time, stocks higher as well as market take away is the Fed is farther along the hiking path.
  • While discussing whether every meeting is "live", Chairman Powell said "we are going meeting by meeting, asking ourselves whether we achieved a stance of policy sufficiently restrictive to bring inflation down 2% over time" - "we have come very far with this rate hiking cycle, very far."
  • Projected rate hikes into early 2024 continue to step down: December cumulative of 4.8bp at 5.373%, January 2024 cumulative 7.3bp at 5.398%, while March 2024 starts pricing in a cut (20.3%) with cumulative at 2.6bp at 5.350%. Fed terminal has slipped to 5.385% in Feb'24.
  • Projected rate hikes into early 2024 continue to step down: December cumulative of 4.8bp at 5.373%, January 2024 cumulative 7.3bp at 5.398%, while March 2024 starts pricing in a cut (20.3%) with cumulative at 2.6bp at 5.350%. Fed terminal has slipped to 5.385% in Feb'24.
  • Busy first half saw Treasury futures turn higher after lower than expected ADP private jobs data (113k vs. 150k est, 89k prior). Futures bounced again after nominal Tsy refunding hikes ($112B vs. $114B estimate).
  • Tsy futures surged higher yet again after weaker than expected ISM data: Mfg (46.7 vs. 49.0 est), Employ (46.8 vs. 50.6 est), New Orders (45.5 vs. 49.8 est) and Prices Paid (45.1 vs 45.0 est).
  • Meanwhile, Construction Spending MoM (0.4% vs. 0.4% est, prior up-revised to 1.0 from 0.5%) while JOLTS Job Openings firmed (9.553M vs. 9.400M est, prior down-revised to 9.497M from 9.610M).
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