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US TSYS: Tsys Futures Edge Higher Following PCE Data

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Tsys futures traded higher into the close on Friday although spent the 2nd half of the session trading sideways. TY closed +0-10+ at 114-23+ vs. 114-25 high with initial technical resistance at 115-02.5 (Sep 19 high​), while TU closed +0-03⅝ at 104-09⅞.
  • The Fed's Musalem supports a gradual reduction of interest rates after last week's significant cut. In an interview, he indicated that more than one 25bps cut could occur this year, having backed the half-point cut at the September meeting. Musalem believes the U.S. economy remains strong, with a solid business sector, despite a cooling labor market. He emphasized that if economic or labor market conditions weaken further, faster rate cuts might be necessary.
  • Looking at Friday's data: Personal income (0.2% vs 0.4% expected) and spending were a little softer than expected in August on a nominal basis, but in "real" terms this was a solid. Core PCE inflation confirmed trend rates very similar to what Fed Gov Waller had indicated last week. That leaves inflation over the latest four months a little below the 2% PCE target and “supercore” inflation almost at target (although both a little stronger more recently).
  • Cash tsys curves recovered some ground after Thursday flattening move, curves steepened with yields 2-7bps lower. the 2yr closed -6.9bps at 3.559%, while the 10yr closed 4.5bps at 3.751% with the 2s10s closing -2.381 at 18.935 vs weekly highs of 23.585
  • Friday's data underscored a rise in projected rate cuts into early 2025 gained vs. pre-data levels (*): Nov'24 cumulative -38.5bp (-37.2bp), Dec'24 -76.8bp (-73.9bp), Jan'25 -109.5bp (-104.5bp).​​
  • Looking ahead: relatively quiet start to the week with MNI Chicago PMI later today
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  • Tsys futures traded higher into the close on Friday although spent the 2nd half of the session trading sideways. TY closed +0-10+ at 114-23+ vs. 114-25 high with initial technical resistance at 115-02.5 (Sep 19 high​), while TU closed +0-03⅝ at 104-09⅞.
  • The Fed's Musalem supports a gradual reduction of interest rates after last week's significant cut. In an interview, he indicated that more than one 25bps cut could occur this year, having backed the half-point cut at the September meeting. Musalem believes the U.S. economy remains strong, with a solid business sector, despite a cooling labor market. He emphasized that if economic or labor market conditions weaken further, faster rate cuts might be necessary.
  • Looking at Friday's data: Personal income (0.2% vs 0.4% expected) and spending were a little softer than expected in August on a nominal basis, but in "real" terms this was a solid. Core PCE inflation confirmed trend rates very similar to what Fed Gov Waller had indicated last week. That leaves inflation over the latest four months a little below the 2% PCE target and “supercore” inflation almost at target (although both a little stronger more recently).
  • Cash tsys curves recovered some ground after Thursday flattening move, curves steepened with yields 2-7bps lower. the 2yr closed -6.9bps at 3.559%, while the 10yr closed 4.5bps at 3.751% with the 2s10s closing -2.381 at 18.935 vs weekly highs of 23.585
  • Friday's data underscored a rise in projected rate cuts into early 2025 gained vs. pre-data levels (*): Nov'24 cumulative -38.5bp (-37.2bp), Dec'24 -76.8bp (-73.9bp), Jan'25 -109.5bp (-104.5bp).​​
  • Looking ahead: relatively quiet start to the week with MNI Chicago PMI later today