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Tsys Futures Unwind Retail Sales Move, Curve Bull-Flattens

US TSYS
  • Treasury futures finished near session highs with the long-end out-performing. There was a earlier selloff on the back on some stronger-than-expected Retail Sales numbers although that move was entirely reversed. TUU4 closed +0-00⅝ at 102-19+ just off intraday highs of 102-21⅝, while TYU4 closed +0-11+ at 111-12, we have opened Asia trading little changed.
  • A bullish theme in Treasuries remains intact. Last week’s gains confirmed an extension of the bull cycle that started Jul 1. Initial support sits at 110-12+ (20-day EMA) with a break here opening a move to 110-01+ (50-day EMA). To the upside, initial resistance sits at 111-13 (Mar 25 highs) above here 111-31 (1.382 proj of the Apr 25 - May 16 - 29 price swing)
  • The cash treasury curve bull-flattened on Tuesday with yields 4-8.5bps lower across the curve. The 2y yield was -4bps at 4.417%, the 7yr was -6.8bps at 4.096% while the 10yr yield finished +7.2bps at 4.158%, the 2s10s closed -3.153 at -26.170.
  • Data: Overall retail sales saw flat (-0.02% unrounded) growth M/M, slower than the +0.3% registered in May (upward rev from 0.1%) , but above the -0.3% expected. Sales ex-autos (+0.4% vs 0.1% expected) and ex-auto/gas (+0.8% vs +0.2% expected) impressed, and also with higher revisions.
  • A YouGov survey of swing states has found that President Joe Biden faces "long odds" for getting re-elected: "He trails in all seven states, six of which he won in 2020 — a significant decline from his position in those states in March (See link)
  • Projected rate cut pricing into year end remains slightly cooler vs. late Monday levels (*): July'24 at -6.5% w/ cumulative at -1.6bp at 5.313%, Sep'24 cumulative -26.6bp (-27.5bp), Nov'24 cumulative -42.9bp (-44.1bp), Dec'24 -65.4bp (-65.8bp).
  • Focus turns to Wednesday's Build Permits, House Starts, Beige Book, Tsy 20Y Bond auction reopen
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