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Tsys Don't Fear the Shutdown, Nor Quarter End For That Matter

US TSYS
  • Support for Treasury futures continued to ebb in the second half, bonds steady briefly before climbing again on quarter/month end positioning. Tsys started to consolidate late morning - largely knock-on effect as EGB's pared gains ahead the weekend. Moves not related to impending US Govt shutdown expected to start Sunday.
  • Current Dec'23 10Y futures +6 at 108-01.5 vs. 107-26 low, well above initial technical support of 107-05+ 1.382 proj of the Jul 18 - Aug 4 - Aug 10 price swing. Dec'23 30Y futures tapped steady after the bell but rebounded +7 to 113-23 on quarter/month-end extension trade.
  • Curves steeper with the short end outperforming, 3m10Y +1.687 at -87.756, 2Y10Y +2.326 at -46.222.
  • Treasury futures had extended highs following a raft of in-line data this morning that pointed to cooling inflation metrics heading into the fall.
  • Fast two-way trade reported after initial data came out largely in-line:
    • Personal Income (0.4% vs. 0.4% est)
    • Personal Spending (0.4% vs. 0.5% est, prior up-revised to 0.09%)
    • Real Personal Spending (0.1% vs. 0.0% est)
    • PCE Deflator MoM (0.4% vs. 0.5% est), YoY (3.5% vs. 3.5% est)
    • PCE Core Deflator MoM (0.1% vs. 0.2% est), YoY (3.9% vs. 3.9% est)
  • Little observable reaction to lower than est. Chicago PMI (44.1 vs. 47.6 est, 48.7 prior) and after slightly higher UofM consumer sentiment at 68.1 vs. 67.7 est, 1- and 5Y inflation expectations in-line with expectations of 3.2% and 2.8% respectively.
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