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US TSYS: Tsys Yields Surge Following CPI, 10yr At 4.621%

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Tsys fall after stronger-than-expected CPI, losses were broadly sustained into the close although we trade slightly off the lows, while soft demand for 10yr notes at auction didn't help yield which closed cheaper by 8bp-10bp across the curve, led by the belly. TU, FV & TY contracts made new monthly lows, with TU closing -04 5/8 at 102-17 3/4, while TY closed -22 at 108-08+
  • The 10-year note auction tailed by just under a bps, bidding statistics were solid, however, with 14.8% primary dealer award slightly lower than previous as indirect bidder award increased to 71.5%, offsetting drop in direct bidder award to 13.6%
  • In front-end, Fed-dated OIS adjusted after the data to price in just one 25bp rate cut by year-end, with the market now expecting a cut in December, after previously pricing in one in September
  • Cash tsys curves bear-steepened, while the belly of the curve under performed. The 5yr closed +9.8bps at 4.468%, while the 10yr closed +8.6bps at 4.621% and now trades 22bps off the recent lows made on Feb 5th. The 2s10s closed +1.8bps at 23.385, while the 5s30s fell 1bps to 36.267.
  • Core CPI was clearly far stronger than expected in Jan at 0.446% M/M sa (MNI unrounded median 0.30, av 0.29) which was only partially offset by recent downward revisions in Q4 with 0.210% M/M in Dec (from 0.225), 0.29% in Nov (from 0.31) and 0.266% in Oct (from 0.28%).
  • Focus will now turn to PPI later today
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  • Tsys fall after stronger-than-expected CPI, losses were broadly sustained into the close although we trade slightly off the lows, while soft demand for 10yr notes at auction didn't help yield which closed cheaper by 8bp-10bp across the curve, led by the belly. TU, FV & TY contracts made new monthly lows, with TU closing -04 5/8 at 102-17 3/4, while TY closed -22 at 108-08+
  • The 10-year note auction tailed by just under a bps, bidding statistics were solid, however, with 14.8% primary dealer award slightly lower than previous as indirect bidder award increased to 71.5%, offsetting drop in direct bidder award to 13.6%
  • In front-end, Fed-dated OIS adjusted after the data to price in just one 25bp rate cut by year-end, with the market now expecting a cut in December, after previously pricing in one in September
  • Cash tsys curves bear-steepened, while the belly of the curve under performed. The 5yr closed +9.8bps at 4.468%, while the 10yr closed +8.6bps at 4.621% and now trades 22bps off the recent lows made on Feb 5th. The 2s10s closed +1.8bps at 23.385, while the 5s30s fell 1bps to 36.267.
  • Core CPI was clearly far stronger than expected in Jan at 0.446% M/M sa (MNI unrounded median 0.30, av 0.29) which was only partially offset by recent downward revisions in Q4 with 0.210% M/M in Dec (from 0.225), 0.29% in Nov (from 0.31) and 0.266% in Oct (from 0.28%).
  • Focus will now turn to PPI later today