US TSYS: 2s10s Steepening Extends After Bullard Comments

TYH4 is trading at 111-08+, + 01+ from NY closing levels.

• 2Y Tsys saw a decent rally going into the close, seemingly following former St Louis Fed’s Bullard seeing prospects for the Fed cutting in 1H24 before inflation returns to the 2% target, in absence of clearer drivers.
• The WSJ article was published at 1345ET (local time) but it took another 15mins for any reaction, which then built and saw a helping hand from a block suggested buy of almost 24k in TUH4 at 102-19+ at 1431ET.
• The 2Y closed -2.5bp on the day , the move extends prior steepening with 2s10s +4.8bps at -23.6bps but only back to late Friday levels.• Fed Funds implied cuts have lifted modestly to a cumulative 12bp for March, 57bp for June and 136bp for Dec.
• The longer end was under pressure throughout the the overnight session. Moves through early European hours could be seen as delayed BoJ impetus and impending EU bond supply from the dual tranche, with January's total bond sale tally of €293bln marking the busiest January in European bond sales ever.
• Later tonight, flash US PMIs, the BoC decision and 5Y supply (after today’s 2Y landed on the screws, with lower bid-to-cover but higher indirect take), before Thursday sees the ECB decision plus first estimates for Q4 US GDP/core PCE and 7Y supply.