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US TSYS: Firmly Bull Steeper On Extension Of 50bp Cut Speculation

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Treasuries have extended the gap higher seen with the Asia open on increased speculation that next week’s Fed decision is a closer call between a 25bp or 50bp cut than markets had been expecting after this week’s CPI and PPI data.
  • Today’s scheduled focus is on inflation data, with international prices offering a last, albeit minor, potential tweak to core PCE estimates before U.Mich inflation expectations. Markets are also likely to remain on tenterhooks for any other (possibly clearer) blackout steers.
  • Cash yields range from 1.8-6.3bps lower, with 2Y yields leading declines.
  • 2s10s at 7bps (+3.3bp) hovers close to recent fleeting highs of 8bps, otherwise last higher in mid-2022. .
  • The bull steepening has increased through European hours, with the longer end pulling back more notably from earlier highs.
  • The long-end naturally lags but also sees additional impetus for the move after yesterday's 30Y auction tailed by 1.5bps.
  • TYZ4 sits at 115-13+ (+ 07+) on solid cumulative volumes approaching 400k. It’s off an earlier high of 115-18+ which eclipsed yesterday’s 115-17+ but remained below the 115-23+ seen pre-CPI.
  • The trend needle points north with further resistance seen at 115-31 (Fibo projection of Aug 8-21-Sep 3 swing) before the round 116-00.
  • Data: Import/exports prices Aug (0830ET), U.Mich Sep prelim (1000ET)
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  • Treasuries have extended the gap higher seen with the Asia open on increased speculation that next week’s Fed decision is a closer call between a 25bp or 50bp cut than markets had been expecting after this week’s CPI and PPI data.
  • Today’s scheduled focus is on inflation data, with international prices offering a last, albeit minor, potential tweak to core PCE estimates before U.Mich inflation expectations. Markets are also likely to remain on tenterhooks for any other (possibly clearer) blackout steers.
  • Cash yields range from 1.8-6.3bps lower, with 2Y yields leading declines.
  • 2s10s at 7bps (+3.3bp) hovers close to recent fleeting highs of 8bps, otherwise last higher in mid-2022. .
  • The bull steepening has increased through European hours, with the longer end pulling back more notably from earlier highs.
  • The long-end naturally lags but also sees additional impetus for the move after yesterday's 30Y auction tailed by 1.5bps.
  • TYZ4 sits at 115-13+ (+ 07+) on solid cumulative volumes approaching 400k. It’s off an earlier high of 115-18+ which eclipsed yesterday’s 115-17+ but remained below the 115-23+ seen pre-CPI.
  • The trend needle points north with further resistance seen at 115-31 (Fibo projection of Aug 8-21-Sep 3 swing) before the round 116-00.
  • Data: Import/exports prices Aug (0830ET), U.Mich Sep prelim (1000ET)