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Twist Flattening Pre US CPI, 10Y Supply Follows Later

US TSYS
  • Cash Tsys trade with a twist flattening pivoting around 5s ahead of the day’s key risk event, US CPI (preview here, noting that BBG consensus has since lifted to 0.4 for core after further survey entries). 2Y and 3Y tenors underperform, possibly some reversal after yesterday’s paring of losses on the surprisingly strong 3Y auction. There appears to have been little progress made at yesterday’s congressional leaders meeting on the debt ceiling, with another meeting pencilled in for Friday.
  • 2YY +2.1bp at 4.043%, 5YY -0.3bp at 3.491%, 10YY -1.7bp at 3.501% and 30YY -2.4bp at 3.815%. 2YY have struggled to clear 4.07% in the past two days with the market recently trimming rate cut expectations but still eyeing more than two fully priced 25bp cuts to year-end.
  • TYM3 trades 2 ticks higher at 115-08 in a relatively narrow 0-14 range for the day with subdued cumulative volumes of 200k, unsurprisingly ahead of US CPI. It remains close to yesterday’s low of 115-01+ after which sits the 50-day EMA of 114-26+, whilst to the upside lies resistance at 115-27+ (May 8 high).
  • Data: Weekly MBA mortgage apps (0700ET), CPI (0830ET), Real Av Earnings (0830ET), Mthly Budget Statement (1400ET).
  • Note/bond issuance: US Tsy $35B 10Y Notes (1300ET)
  • Bill issuance: US Tsy $36B 17W Bills (1130ET)

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