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US TSYS: A Strong Rally On Bessent Pick And Tumbling WTI

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Treasuries have seen strong gains today over three steps. They opened higher in response to Bessent’s pick as Treasury Secretary at the weekend, WTI futures tumbled on Israel-Hezbollah ceasefire prospects and then the strong 2Y auction firmly passed a test of front-end demand to remove a barrier against further Bessent-linked plays.
  • Cash yields are 10-14bp lower on the day, with declines led by 30s.
  • Declines have been seen in both real yields and inflation breakevens (10Y -8bps real, -5.8bps breakeven). 10Y yields of 4.263% sit almost 24bp below recent highs of 4.501% from mid-Nov.
  • 2s10s is at 0.1bps (-2.8bp from Fri) having fluctuated within +/-2ps around zero since the Asia open. It has seen its first inversion since Oct 7.
  • TYZ4 trades at 110-15+ (+ 27), holding close to an earlier high of 110-18. It made light work of resistance at 110-04+ (20-day EMA) and opens 111-09 (50-day EMA) as it tests what had been a bearish technical trend.
  • Fed Funds implied rates are little changed for the near-term but the broader rally increasingly weighs further out into 2025 (the Dec rate is -0.5bp since Fri vs -4.5bp for the Jun’25). It leaves 13bp of cuts for Dec before a cumulative 19bp for Jan and 52bp for June.
  • Tomorrow sees FOMC minutes after a string of hawkish Fedspeak (MNI Preview here) and 5Y supply. It’s followed by GDP/PCE data and 7Y supply on Wed before Thanksgiving closures. 
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  • Treasuries have seen strong gains today over three steps. They opened higher in response to Bessent’s pick as Treasury Secretary at the weekend, WTI futures tumbled on Israel-Hezbollah ceasefire prospects and then the strong 2Y auction firmly passed a test of front-end demand to remove a barrier against further Bessent-linked plays.
  • Cash yields are 10-14bp lower on the day, with declines led by 30s.
  • Declines have been seen in both real yields and inflation breakevens (10Y -8bps real, -5.8bps breakeven). 10Y yields of 4.263% sit almost 24bp below recent highs of 4.501% from mid-Nov.
  • 2s10s is at 0.1bps (-2.8bp from Fri) having fluctuated within +/-2ps around zero since the Asia open. It has seen its first inversion since Oct 7.
  • TYZ4 trades at 110-15+ (+ 27), holding close to an earlier high of 110-18. It made light work of resistance at 110-04+ (20-day EMA) and opens 111-09 (50-day EMA) as it tests what had been a bearish technical trend.
  • Fed Funds implied rates are little changed for the near-term but the broader rally increasingly weighs further out into 2025 (the Dec rate is -0.5bp since Fri vs -4.5bp for the Jun’25). It leaves 13bp of cuts for Dec before a cumulative 19bp for Jan and 52bp for June.
  • Tomorrow sees FOMC minutes after a string of hawkish Fedspeak (MNI Preview here) and 5Y supply. It’s followed by GDP/PCE data and 7Y supply on Wed before Thanksgiving closures.