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UofM Sentiment Tempers Post-Claims Rally, Rate Cut Pricing Cools

US TSYS
  • Treasury futures traded sideways heading into the US session on Friday, before completely reversing Thursday's post-claims rally following higher than expected UofM inflation exp. The 10Y contract closed near session lows at 108-22+ down (- 12+) for the day, we are opening up (+ 01) at 108-23 this morning.
  • Looking at technicals, we still sit comfortably above initial support at 108-15+ (20-day EMA) a break here would open a retests of 107-04 (Apr 25 lows), while initial resistance is 109-06+/08+ (Channel top from Feb 1 high / 50-day EMA)
  • Cash Treasury curve bear-flattened on Friday, yields were 3-5bps higher, with the 2Y yield +5bp at 4.866%, 10Y +4.3bps to 4.496%, while the 2y10y -0.690 at -37.129
  • On the data front U. of Mich. Sentiment was 67.4 vs 76.2 expected, down from 77.2 in Apr, while inflations expectations were higher than expected with the 1yr coming in at 3.5% vs 3.2% and the 5-10yr expectation 3.1% vs 3.0% expected and the Monthly Budget Statement coming in at $209.5b vs $250b expected.
  • The projected rate cut pricing cooled vs. late Thursday: June 2024 at -5% w/ cumulative rate cut -1.2bp (-2.5bp late Thu) at 5.307%, July'24 at -22% w/ cumulative at -6.7bp (-9bp late Thu) at 5.253%, Sep'24 cumulative -19.2bp vs. -22.4bp, Nov'24 cumulative -27.7bp -31.1bp, Dec'24 -40.9bp vs. -45bp.
  • Looking Ahead: A slow start to the week, focus is on PPI and CPI on Tue/Wed
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