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Tsys Curve Sees Greater Selling Through Belly, Kaplan Sees Cuts in Sept

US TSYS
  • Treasury futures are lower this morning, although we trade well within Wednesday ranges. The Fed's Beige Book showed slight economic growth and cooling inflation overnight, while Fed Governor Waller said they are getting “closer” to cutting rates, but is not there yet.
  • Post NY close Former Fed Dallas President Kaplan said he anticipates the Fed may reduce interest rates in September and possibly again in December, but does not expect it to initiate a prolonged rate-cut cycle due to high fiscal deficits and energy prices.
  • TUU4 is -0-01+ at 102-18¾ while TYU4 is currently -0-06 at 111-08
  • The cash treasury curve has seen better selling through the belly of the curve, with the 5-7yr tenors 1.8-1.9bps cheaper.
  • Earlier, Biden was confirmed to have covid, this follows comments he made saying he would potentially drop out if diagnosed with a "medical condition". The betting markets have swung again post this news with Kamala jumping 25pts to 47%, while Biden has dropped 26pts to 44% chance of being the Democratic Party nominee.

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