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US TSYS: Curves Twist Steeper, Projected Rate Cuts Consolidate

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Treasuries look to finish mixed after a volatile first half. Markets are still digesting this morning's higher than expected CPI and weekly jobless claims while Fed speak came out mixed: Atlanta Fed Bostic saying the door is open to skipping a rate cut at the next November, while NY Fed Williams sees a solid U.S. labor market and inflation is closing in on 2% over time.
  • Initial jobless claims for the six states most heavily impacted by Hurricane Helene saw non-seasonally adjusted claims rise to 35.5k vs closer to the 20k or even a little below that is typical for the time of year.
  • The upside surprise in September CPI (headline 0.18% M/M vs 0.08% expected, Core 0.31% vs 0.25% expected) was driven by multiple factors - which may not be translated into the Fed's preferred PCE gauge, potentially mitigating the upside surprise from a market perspective.
  • Short end disconnected as Tsy curves twisted steeper (2s10ss +5.147 at 9.831), while projected rate cuts have scaled back from this morning's post-data highs (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -44.2bp (-46.5bp), Jan'25 -63.9bp (-68.9bp).
  • Strong 30Y Bond auction reopen traded through: 4.389% high yield vs. 4.405% WI; 2.50x bid-to-cover vs. 2.38x in the prior month. Indirect take-up surged to new all-time high of 80.47% vs. 68.68% prior; direct bidder take-up 7.37% vs. 15.66% prior; primary dealer take-up 12.16% vs. 15.66% prior.
  • Focus turns to Friday's PPI and University of Michigan inflation expectations, as well as the start of the latest earning cycle with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.
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  • Treasuries look to finish mixed after a volatile first half. Markets are still digesting this morning's higher than expected CPI and weekly jobless claims while Fed speak came out mixed: Atlanta Fed Bostic saying the door is open to skipping a rate cut at the next November, while NY Fed Williams sees a solid U.S. labor market and inflation is closing in on 2% over time.
  • Initial jobless claims for the six states most heavily impacted by Hurricane Helene saw non-seasonally adjusted claims rise to 35.5k vs closer to the 20k or even a little below that is typical for the time of year.
  • The upside surprise in September CPI (headline 0.18% M/M vs 0.08% expected, Core 0.31% vs 0.25% expected) was driven by multiple factors - which may not be translated into the Fed's preferred PCE gauge, potentially mitigating the upside surprise from a market perspective.
  • Short end disconnected as Tsy curves twisted steeper (2s10ss +5.147 at 9.831), while projected rate cuts have scaled back from this morning's post-data highs (*): Nov'24 cumulative -20.7bp (-22.7bp), Dec'24 -44.2bp (-46.5bp), Jan'25 -63.9bp (-68.9bp).
  • Strong 30Y Bond auction reopen traded through: 4.389% high yield vs. 4.405% WI; 2.50x bid-to-cover vs. 2.38x in the prior month. Indirect take-up surged to new all-time high of 80.47% vs. 68.68% prior; direct bidder take-up 7.37% vs. 15.66% prior; primary dealer take-up 12.16% vs. 15.66% prior.
  • Focus turns to Friday's PPI and University of Michigan inflation expectations, as well as the start of the latest earning cycle with several banks reporting before the open: Wells Fargo, JP Morgan, Bank of NY Mellon and Blackrock.