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Tsys Rally on Soft PPI, Higher Weekly Claims & Strong 30Y Auction

US TSYS
  • Treasury futures have recovered from the post-FOMC reversal as Thursday's softer PPI and higher weekly claims rekindled 50bp in rate cut pricing by year end. They were also supported by a strong $22b 30Y auction, finishing off session best's levels however still considerably higher for the day with TYU4 +13 at 110-23, and TUU4 +0-04¼ at 102-09⅜.
  • Treasuries rallied sharply higher Wednesday and in the process breached a number of short-term resistance points. Looking at technical levels for TYU4, initial support is at 109-16 (50-day EMA), with the 109-00+ (Jun 10 lows). While to the upside initial resistance is at 110-27/27+ (Jun 13 high / 1.00 proj of the Apr 25 - May 16 - 29 price swing), above here we target 111-09 (Apr 1 highs)
  • Cash treasury curve bull-flattened on Thursday, yields were 5-8bps lower. The 2Y -5.5bps to 4.697%, 7Y -7.3bps to 4.235%, the 10Y -7.2bps at 4.244% while the 2y10y was -1.479 at -45.479.
  • Data: Initial Jobless Claims 242k vs 225k est. Continuing Claims 1,820k vs 1,795k est. PPI Final Demand -0.2% m/m vs 0.1% est, Ex food & Energy 0.0% vs 0.3% est
  • (MNI) June 2024 Fed Review Analyst Views: (See link)
  • Short end support sees rate cut projections near pre-FOMC levels (*): July'24 at -12% (-14%) w/ cumulative at -3bp (-3.8bp) at 5.298%, Sep'24 cumulative -20bp (-20.9bp), Nov'24 cumulative -29.3bp (-31.7bp), Dec'24 -50.4bp (-50.7bp).
  • Looking ahead, Fed Out of Blackout, Import/Exp Prices and UofM inflation expectations.
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