US TSYS: Curve Bull Flattens In Risk-Off Session

Treasuries gained Tuesday in the return from the Labor Day weekend, though core FI gains were relatively tame in comparison to the broader risk-off move in global markets.

• Almost the entirety of Treasury gains were made between 0830-1000ET, which coincided with a sharp pullback in oil prices (WTI down more than 4% on the day) as well as soft data including construction activity and ISM Manufacturing.
• While the standout market move was in equities, which saw their worst session in a month as tech names dropped, the Treasury move actually preceded the stock risk-off move, and yields hit the lows before 1100ET before trading largely sideways.
• Further Treasury gains may have been restrained in part by heavy corporate issuance, with Bloomberg reporting that this was the "busiest single sales day" on record (the day after Labor Day was also the most active of 2023).
• The Treasury curve bull flattened, keeping 2s10s from closing in positive territory for another day.
• With markets closely focused on Friday's nonfarm payrolls, attention Wednesday will be on JOLTS job openings data, with the Bank of Canada decision (likely cut) also eyed.
• Late-session levels: The Dec 24 T-Note future is up 16/32 at 114-20, having traded in a range of 113-12 to 114-07.5. The 2-Yr yield is down 4.3bps at 3.8734%, 5-Yr is down 5.9bps at 3.6439%, 10-Yr is down 7.1bps at 3.8329%, and 30-Yr is down 7.4bps at 4.122%.