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Tsys Near Session Highs After Inflation Measure Cools Slightly

US TSYS
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  • Treasuries look to finish broadly higher Friday - trading sideways since climbing to session highs by midmorning amid a general consensus that inflation has cooled slightly as PCE Price Index slipped to 2.5% from 2.6% prior YoY.
  • Tsy Sep'24 10Y futures currently trade 111-08 last (+14.5) vs. 111-08.5, below initial technical resistance of 111-13+/17+ (High Jul 16 / 1.382 of Apr 25-May 16-29 swing).
  • Early data-driven volatility saw Treasury futures alternately gap higher, lower and back higher, in turn extending overnight low/high end of the range after latest Personal Income comes out lower than expected, Personal Spending in-line while the prior was up-revised.
  • Core PCE inflation ended up being very much as analysts expected in June, at 0.18% M/M (detailed post-CPI and PPI estimates had averaged around 0.17%). Instead, yesterday’s upside surprise for Q2 was primarily concentrated in May.
  • Little overall reaction to the University of Michigan data: 1Y inflation: confirmed at 2.9% (cons and prelim 2.9) in July after 3.0% in June; 5-10Y inflation: surprisingly revised up to unchanged at 3.0% (cons and prelim 2.9) in July.
  • Support and mildly steeper curves (2s10s +0.629 at -18.573), projected rate cut pricing into year end look steady to mildly higher vs. pre-data levels (*): July'24 at -4.5% w/ cumulative at -1.1bp at 5.318%, Sep'24 cumulative -28.4bp (-27.8bp), Nov'24 cumulative -45.1bp (-44.6bp), Dec'24 -67.9bp (-67.2bp).
  • Focus on the week ahead ahead: Monday kicks off with Dallas Fed Mfg Activity at 1030 followed by the US Tsy Borrowing estimates at 1500ET. The TSY quarterly refunding annc is on Wed at 0830ET, along with ADP, PMI and the next FOMC policy annc. Next Friday sees the July nonfarm payrolls data.
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  • Treasuries look to finish broadly higher Friday - trading sideways since climbing to session highs by midmorning amid a general consensus that inflation has cooled slightly as PCE Price Index slipped to 2.5% from 2.6% prior YoY.
  • Tsy Sep'24 10Y futures currently trade 111-08 last (+14.5) vs. 111-08.5, below initial technical resistance of 111-13+/17+ (High Jul 16 / 1.382 of Apr 25-May 16-29 swing).
  • Early data-driven volatility saw Treasury futures alternately gap higher, lower and back higher, in turn extending overnight low/high end of the range after latest Personal Income comes out lower than expected, Personal Spending in-line while the prior was up-revised.
  • Core PCE inflation ended up being very much as analysts expected in June, at 0.18% M/M (detailed post-CPI and PPI estimates had averaged around 0.17%). Instead, yesterday’s upside surprise for Q2 was primarily concentrated in May.
  • Little overall reaction to the University of Michigan data: 1Y inflation: confirmed at 2.9% (cons and prelim 2.9) in July after 3.0% in June; 5-10Y inflation: surprisingly revised up to unchanged at 3.0% (cons and prelim 2.9) in July.
  • Support and mildly steeper curves (2s10s +0.629 at -18.573), projected rate cut pricing into year end look steady to mildly higher vs. pre-data levels (*): July'24 at -4.5% w/ cumulative at -1.1bp at 5.318%, Sep'24 cumulative -28.4bp (-27.8bp), Nov'24 cumulative -45.1bp (-44.6bp), Dec'24 -67.9bp (-67.2bp).
  • Focus on the week ahead ahead: Monday kicks off with Dallas Fed Mfg Activity at 1030 followed by the US Tsy Borrowing estimates at 1500ET. The TSY quarterly refunding annc is on Wed at 0830ET, along with ADP, PMI and the next FOMC policy annc. Next Friday sees the July nonfarm payrolls data.