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Tsys Futures Rally On Soft US CPI

US TSYS
  • Treasury futures gapped higher on weaker-than-expected US CPI, curves bull steepened as rate cut pricing into year end gained momentum. Overshadowed by the CPI report, jobless claims data offered the first week since early May with both initial and continuing claims coming in lower than expected.
  • TUU4 closed +0-07¾ at 102-16⅛ while TYU4 closed +0-21 at 111-05 and we have opened little a touch lower on Friday with TY at 111-01.
  • Treasuries have rallied overnight, confirming an extension of the bull cycle that started Jul 1. The move higher has resulted in a breach of resistance at 111-01, the Jun 14 high. Initial support rests at 109-28+ (50-day EMA), a break here would open a move to 109-02+ (Jul 1 low), while to the upside 111-10+ (July 11 high) a break here would see us test 111-13 (Mar 25 high)
  • The cash treasury curve bull-steepened post US CPI, with yields 5-11bps lower. The 2y closed -10.7bps at 4.513%, 7yr -8.6bps at 4.156%, while the 10y was -7.4bps at 4.210%. The 2s10s was +3.091 at -30.707.
  • Fed's Goolsbee expressed confidence that the U.S. economy is on track to achieve 2% inflation, where he described the recent data as "excellent". He noted that maintaining the current interest rate range effectively tightens economic conditions, as the economy is not overheating, he stopped short of mentioning when he expected a rate cut to come, as per BBG.
  • Looking ahead, We have PPI, U. of Mich. Sentiment while Wells Fargo, Bank Of NY Mellon, JPM & Citigroup report earnings

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