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US TSYS: Projected Rate Cut Pricing Cools, Geopol Tension Buoys Bonds

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Treasuries looked to finish higher Tuesday, off early session highs, curves bull flattening (2s10s -2.160 at 10.995) with bonds outperforming.
  • Heightened geopolitical tensions lent to an early bid in EGBs, Treasuries in tow after Ukraine launched US made long range missiles into Russia. The Kremlin have formally approved a further tweak to their nuclear doctrine, allowing for use of nuclear weaponry in the case of long-range missiles used to strike inside Russian territory.
  • Risk-off support moderated as the session wore on, US State Department Spokesperson Matthew Miller told reporters that the US has "seen no reason" to adjust its nuclear posture following Russian President Vladimir Putin's move to revise Russia's nuclear doctrine.
  • Short end rates receded in the second half, tempering projected rate cuts pricing into early 2025, KC Fed Schmid said "now is the time to dial back restrictiveness of policy". Schmid repeated "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle."
  • As curves bull flattened, projected rate cuts into early 2025 receded vs. early morning levels (*) : Dec'24 cumulative -14.8bp (-15.4bp), Jan'25 -21.7bp (-24.0bp), Mar'25 -36.0bp (-39.5bp), May'25 -43.9bp (-48.2bp).
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  • Treasuries looked to finish higher Tuesday, off early session highs, curves bull flattening (2s10s -2.160 at 10.995) with bonds outperforming.
  • Heightened geopolitical tensions lent to an early bid in EGBs, Treasuries in tow after Ukraine launched US made long range missiles into Russia. The Kremlin have formally approved a further tweak to their nuclear doctrine, allowing for use of nuclear weaponry in the case of long-range missiles used to strike inside Russian territory.
  • Risk-off support moderated as the session wore on, US State Department Spokesperson Matthew Miller told reporters that the US has "seen no reason" to adjust its nuclear posture following Russian President Vladimir Putin's move to revise Russia's nuclear doctrine.
  • Short end rates receded in the second half, tempering projected rate cuts pricing into early 2025, KC Fed Schmid said "now is the time to dial back restrictiveness of policy". Schmid repeated "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle."
  • As curves bull flattened, projected rate cuts into early 2025 receded vs. early morning levels (*) : Dec'24 cumulative -14.8bp (-15.4bp), Jan'25 -21.7bp (-24.0bp), Mar'25 -36.0bp (-39.5bp), May'25 -43.9bp (-48.2bp).