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Tsys Bear Flattening Into Month/Quarter End


The Treasury curve has bear flattened in overnight trade Friday, with Eurozone inflation data holding sway early, but US data taking over in the afternoon.

  • Jun 10-Yr futures (TY) have traded in an 11 tick range in European trade, last down 7/32 at 114-11.5, The high was set overnight at 114-20 prior to stronger-than-expected French inflation data which sank Bunds and brought TYs to session lows (114-09).
  • Eurozone/Italian inflation data at 0500ET was on the weak side and saw a core FI bounce, though that's mostly retraced.
  • Attention swiftly turns to data, with Feb PCE the first port of call at 0830ET - core deflator eyed ticking lower M/M. Then MNI Chicago PMI at 0945ET, followed by final UMich survey at 1000ET.
  • Heading into the data, May FOMC meeting pricing sits at 15bp (no strong conviction of a hike), up a basis point on the day and steady through June. About 50bp of cuts from the peak are priced in by year-end, the least since Mar 22, and down from 57bp yesterday.
  • Month-end dynamics of some note, but Tsy extensions are seen as small.
  • Later Friday we hear from Fed's Williams (1500ET), Cook (1745ET), and Waller (2200ET).
  • Checking on latest cash levels: 2-Yr yield is up 4.6bps at 4.1659%, 5-Yr is up 2.1bps at 3.7045%, 10-Yr is up 2.1bps at 3.5697%, and 30-Yr is up 2bps at 3.7534%.

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