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Twist Steeper Ahead of ADP, Treasury Quarterly Refunding

US TSYS
  • Cash Tsys trade twist steeper, with the front end off highs but still pushing further on from the bid seen at the open before some small net cheaper pressures from 20s onwards.
  • Macro headline flow remains limited through early London hours, leaving discussions surrounding the one-notch rating downgrade of the U.S. by Fitch at the fore and some dovish commentary from Bostic (’24 voter) late yesterday, along with weakness in equity markets.
  • 2YY -4.2bp at 4.860%, 5YY -2.6bp at 4.190%, 10YY -0.6bp at 4.017% and 30YY +0.5bp at 4.097%.
  • The front end moves come with only limited declines in near-term FOMC expectations (seen with a cumulative 8.5bp more tightening to a 5.41% terminal in Nov) but rather with rate cut pricing building and more notably into 2H24. The 57bp of cuts from terminal to Jun’24 and 128bp from terminal to Dec’24 is the highest since Jul 26.
  • TYU3 trades 8+ ticks higher at 111-04+ off highs of 111-07+ but well within yesterday’s range. Volumes are back at recent relatively elevated averages of 310k after lagging through the first half of yesterday. Support is seen at 110-25+ (Jul 28 low) with the key 110-05 (Jul 6 low) exposed, whilst resistance is seen at the 20-day EMA of 111-29+.
  • Data: ADP employment Jul (0815ET) plus weekly MBA mortgage data (0700ET).
  • US Tsy Quarterly Refunding announcement (0830ET)
  • Bill issuance: US Tsy $46B 17W bill auction (1130ET)
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