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Tsy Yld Curves: New Inverted Lows

US TSYS

Tsy futures inching off late session highs after the bell, modest overall volumes (TYH3 just over 950k at the bell), while yield curves quietly bull flattened to deepest level of inversion since late 1981: 2s10s tapped -84.883 low -- signaling uncertainty over potential for economic recession in 2023.

Reviewing second half trades shows 10Y Block buy added vs. large 5Y sale:

  • -19,288 FVH3 108-24.75, sell-through 108-25.5 post-time bid at 1151:17ET, 108-24 last trade, +2 vs. +12,679 TYH3 114-05.5, buy through 114-03.5 post-time offer
  • Tsys were see-sawing in relatively narrow range after midday. Tsy support appeared to mirror moves in German Bunds in the first half.
  • Limited data this morning as participants plied the sidelines to await Friday's Nov PPI (0.2% MoM est vs. 0.2% prior).
    • US OCT TRADE GAP -$78.2B VS SEP -$74.1B
    • US REDBOOK: NOV STORE SALES +5.7% V YR AGO MO; STORE SALES +5.7% WK ENDED DEC 03 V YR AGO WK
  • Fed funds implied hike for Dec'22 +0.6bp from this morning at 51.8bp, Feb'23 cumulative 89.5bp to 4.730% (Mar'23 106.8bp to 4.903%), terminal slips to 4.97% in Jun'23 vs. 5.0% earlier.

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