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US TSYS: Twist Steeper Post-FOMC, Less Than 40bp Of Cuts Seen For 2025

US TSYS
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  • Treasuries sit twist steeper, with the pace of steepening accelerating earlier in London trade before stalling. The front end has firmed in a modest paring of losses seen on yesterday’s hawkish Fed but the long-end sell-off has extended after yesterday’s clearance of 4.50% for 10Y yields.
  • The Fed cut 25bp as expected but there was a surprise dissent and four dots arguing for no change plus a raft of hawkish implications from the dot pot and broader macroeconomic projections. There is only one additional 25bp cut fully priced for 2025. MNI Fed Review here.
  • In politics, Republicans scrapped House Speaker Johnson's bipartisan plan to avert a government shutdown, as President-elect Trump and Elon Musk joined a broad swath of the House GOP on Wednesday to condemn a compromise bill full of Democratic policy priorities (WaPo).
  • Cash yields sit between 3.6bp lower (2s) and 2.9bp higher (30s).
  • 10Y yields have seen session highs of 4.5401% (currently 4.528%, +1.6bp) for fresh highs since May.
  • 2s10s at 21bps (+5bp) starts to eye year-to-date highs of 24bp seen in late September.
  • TYH5 earlier saw new recent lows of 108-24 (currently 108-27+, -05) whilst current cumulative volumes are elevated at 455k. Having cleared a key short-term support at 109-02+ (Nov 15 low), it opens 108-12+ (1.382 proj of Oct 1-14-16 price swing) after which lies 108-00 (both 1.00 proj and round number).
  • Fed Funds futures have marginally pared their hawkish shift on yesterday’s FOMC but still only price 37bp of cuts to end-2025 vs an equivalent closer to 49bp pre-FOMC.
  • Cumulative cuts: 3bp Jan, 13bp Mar, 25bp Jun and 37bp Dec.
  • SOFR-implied terminal yields hover around 4% after late 2026/early 2027 contracts have overtaken early 2026 contracts for the largest sell-off post-FOMC.
  • Today’s data focus is on the third release of Q3 GDP/PCE inflation and weekly jobless claims data covering a payrolls reference period for initial claims. 
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  • Treasuries sit twist steeper, with the pace of steepening accelerating earlier in London trade before stalling. The front end has firmed in a modest paring of losses seen on yesterday’s hawkish Fed but the long-end sell-off has extended after yesterday’s clearance of 4.50% for 10Y yields.
  • The Fed cut 25bp as expected but there was a surprise dissent and four dots arguing for no change plus a raft of hawkish implications from the dot pot and broader macroeconomic projections. There is only one additional 25bp cut fully priced for 2025. MNI Fed Review here.
  • In politics, Republicans scrapped House Speaker Johnson's bipartisan plan to avert a government shutdown, as President-elect Trump and Elon Musk joined a broad swath of the House GOP on Wednesday to condemn a compromise bill full of Democratic policy priorities (WaPo).
  • Cash yields sit between 3.6bp lower (2s) and 2.9bp higher (30s).
  • 10Y yields have seen session highs of 4.5401% (currently 4.528%, +1.6bp) for fresh highs since May.
  • 2s10s at 21bps (+5bp) starts to eye year-to-date highs of 24bp seen in late September.
  • TYH5 earlier saw new recent lows of 108-24 (currently 108-27+, -05) whilst current cumulative volumes are elevated at 455k. Having cleared a key short-term support at 109-02+ (Nov 15 low), it opens 108-12+ (1.382 proj of Oct 1-14-16 price swing) after which lies 108-00 (both 1.00 proj and round number).
  • Fed Funds futures have marginally pared their hawkish shift on yesterday’s FOMC but still only price 37bp of cuts to end-2025 vs an equivalent closer to 49bp pre-FOMC.
  • Cumulative cuts: 3bp Jan, 13bp Mar, 25bp Jun and 37bp Dec.
  • SOFR-implied terminal yields hover around 4% after late 2026/early 2027 contracts have overtaken early 2026 contracts for the largest sell-off post-FOMC.
  • Today’s data focus is on the third release of Q3 GDP/PCE inflation and weekly jobless claims data covering a payrolls reference period for initial claims.