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Tsys Briefly Trim Gains After Higher Than Expected Tsy borrow Estimates

US TSYS
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  • Treasury futures continued to climb off last Thursday's approximate 5-month lows Monday, completely recovering from a sell-off on lower than expected weekly claims and strong PCE data that saw 10Y yield climb to 4.7351% high.
  • Tsys pared gains briefly after higher than expected Tsy borrow estimates to $243 billion in privately held net marketable debt in the second quarter, USD41 billion more than previously announced in January due to lower cash receipts. Officials expect to borrow $847 billion in the third quarter.
  • Otherwise, generally subdued week opener with focus on Wednesday's FOMC policy announcement and April employment report on Friday.
  • Generally, Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.
  • Projected rate cut pricing largely eased slightly: May 2024 -2.1% w/ cumulative -0.5bp at 5.324%; June 2024 at -10.6% w/ cumulative rate cut -3.2bp at 5.297%, July'24 cumulative at -8.1bp, Sep'24 cumulative -18.1bp.
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  • Treasury futures continued to climb off last Thursday's approximate 5-month lows Monday, completely recovering from a sell-off on lower than expected weekly claims and strong PCE data that saw 10Y yield climb to 4.7351% high.
  • Tsys pared gains briefly after higher than expected Tsy borrow estimates to $243 billion in privately held net marketable debt in the second quarter, USD41 billion more than previously announced in January due to lower cash receipts. Officials expect to borrow $847 billion in the third quarter.
  • Otherwise, generally subdued week opener with focus on Wednesday's FOMC policy announcement and April employment report on Friday.
  • Generally, Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.
  • Projected rate cut pricing largely eased slightly: May 2024 -2.1% w/ cumulative -0.5bp at 5.324%; June 2024 at -10.6% w/ cumulative rate cut -3.2bp at 5.297%, July'24 cumulative at -8.1bp, Sep'24 cumulative -18.1bp.