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US CPI Follow-Through Sets The Tone, PPI and Jobless Claims Ahead

US TSYS
  • Cash Tsys have seen a sizeable bull steepening with the front end seeing follow-through from yesterday’s US CPI miss as Treasuries underperform EU and UK FI so far today. Those bids in European FI markets have aided the move along with technical breaks plus some notable flow including a 17K block buy in FV futures (~$728K DV01).
  • The further impetus sees 2Y yields -10.5bp on the day at 4.64% for almost 50bps below their YtD peak of 5.12% registered just one week ago. Behind this latest 2Y move, Fed Funds still price a 22bp hike for July but there’s now just a cumulative +28bp to a Nov peak (firmly against the June dot plot of two hikes) whilst cuts to Dec’24 have built to almost 160bps. That's from 147bp at yesterday’s close, 133bp before CPI and 120bp before Friday’s payrolls.
  • 2YY -10.5bp at 4.641%, 5YY -8.4bp at 3.989%, 10YY -4.5bp at 3.812%, 30YY -1.3bp at 3.934%. 2s10s of -83bps sit close to highs since mid-June.
  • TYU3 trades 12+ ticks higher at 112-21 on solid volumes of 340k, just off its earlier high of 112-24+. It starts to near a key resistance point at the 50-day EMA of 113-12, with a break required to strength the bullish theme.
  • Data: PPI Jun (0830ET), Weekly jobless claims (0830ET), Monthly budget statement Jun (1400ET)
  • Fedspeak: Daly (’24 voter) CNBC interview (1110ET), Fed Gov Waller on economic outlook (1845ET, incl text)
  • Note/bond issuance: US Tsy $18B 30Y Bond auction re-open (912810TR9) – 1300ET
  • Bill issuance: US Tsy $70B 4W, $60B 8W bill auctions – 1130ET

2y Tsy yieldSource: Bloomberg

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