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Unwinding Post-NFP Rally, SLOOS Credit Less Tight Than Estimated

US TSYS
  • Treasury futures are holding just above late session lows after both Tsy and SOFR futures nearly unwound all of Friday's post-NFP rally.
  • A confluence of less tighter credit conditions reported by the Fed's latest Sr Loan Advisor Survey (SLOOS) for Q3, and heavy corporate supply at nearly $27B weighed on rates due to rate lock hedges after $6B RTX Corp 5-tranche and $5.5 Roche 5-tranche issuance surprised to the upside.
  • The SLOOS report has had little impact on pricing for near-term FOMC meetings (which are still seen with essentially an end to the hiking cycle) but has trimmed cuts later into 2024.
  • Fed Funds futures still show the first cut in June but with a cumulative 33bp of cuts vs 36bp pre SLOOS (and 27bps before payrolls), building to a cumulative 91bp of cuts by end-2024 vs 94bp pre SLOOS (and 84bp before payrolls).
  • Cross asset: Stocks are having a mildly rocky morning, S&P Eminis bounced off marginal lows at the same time as Tsys, have since scaled back support to near steady at 4376.00.
  • Tuesday Data Calendar: Multiple Fed Speakers and 3Y Note Sale
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