Tsys Futures Near Lows, Possibly Overreacting to NY Fed Williams

Treasury futures closed near session lows as markets gradually price out dovish policy projections for the year. Treasuries reacted negatively to comments from NY Fed Williams on the potential for a data driven rate hike in the future. Markets may have overreacted while Williams simply stated the Fed can take its time and let well-positioned monetary policy work and let the economy continue to rebalance.

• Jun'24 10Y futures sold off post the Asian session on Thursday, reaching a low of 107-20+ we trade just off these levels as trading gets underway on Friday at 107-25 up +03 from NY closing levels.
• A bear cycle in Treasuries remains in play and short-term gains are considered corrective. Initial resistance is 108-25+ (Apr 12 high), while to the downside, initial resistance is at 107-13+ (Apr 16 low).
• Cash Treasury curve bear-flattened on Thursday, yields were 3-7bps higher. The 2Y yield was +5.4bps at 4.986%, 10Y +4.5bps to 4.633%, while the 2y10y was +0.868 at -35.565.
• Atlanta Fed President Raphael Bostic is speaking at an event in Florida currently where he has stated that the economy is slowing down gradually, with wage growth outpacing the inflation rate. He mentioned that current policy is restrictive but is on the path toward the 2% inflation target, emphasizing a patient approach and reiterating his view of one rate cut this year.
• Looking ahead: There is no economic data to report Friday while Chicago Fed Goolsbee will participate in a moderated Q&A at a SABEW conference (1030ET) ahead of the Fed blackout late Friday.