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US TSYS: Tsys Futures Rally As Oil Drops, Strong 3yr Auction, CPI Later

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America
  • Tsys futures rallied on Tuesday, as oil prices slumped while regulators proposed less onerous changes to capital requirements while there was also strong demand for the 3yr bond auction. Futures held onto gains heading into the close with TUZ4 +0-03⅝ at 104-12+, while TYZ4 closed +0-13 at 115-14+. Focus now turns to the Trump v Harris debate in about 2 hours.
  • The cash tsys curve bull-steepened on Tuesday with yields 3-8bps lower. The 2yr is 3.596% the lowest since Sept 2022, while the 10yr was -5.8bps at 3.642% back to mid 2023 levels. The 2s10s closed  +1.446 at 4.406.
  • There was no data out overnight, markets await Wednesday's CPI, PPI inflation measure on Thursday. Core non-housing service inflation is expected to see at least a repeat of the 0.21% M/M from July, with six analysts between 0.20-0.35% M/M, while the BBG consensus expecting CPI for August to fall to 2.5% from 2.9% prior.
  • There was a $58b 3y bond auction overnight, awards at 3.44%, the lowest yield for the tenor since 2022 and 1.7bp lower than anticipated by the WI level with a bid-cover ratio of 2.66, slightly higher than the recent average of 2.56.
  • Projected rate cuts through year end have regained some ground after receding Monday into early Tuesday (*): Sep'24 cumulative -33.5bp (-32.7bp), Nov'24 cumulative -73.3bp (-71.8bp), Dec'24 -115.4bp (-112.0bp).
  • The Federal Reserve's top banking regulator Michael Barr on Tuesday said the biggest U.S. banks would face a 9% increase in capital requirements in a re-proposal of Basel endgame and G-SIB surcharge rules.
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  • Tsys futures rallied on Tuesday, as oil prices slumped while regulators proposed less onerous changes to capital requirements while there was also strong demand for the 3yr bond auction. Futures held onto gains heading into the close with TUZ4 +0-03⅝ at 104-12+, while TYZ4 closed +0-13 at 115-14+. Focus now turns to the Trump v Harris debate in about 2 hours.
  • The cash tsys curve bull-steepened on Tuesday with yields 3-8bps lower. The 2yr is 3.596% the lowest since Sept 2022, while the 10yr was -5.8bps at 3.642% back to mid 2023 levels. The 2s10s closed  +1.446 at 4.406.
  • There was no data out overnight, markets await Wednesday's CPI, PPI inflation measure on Thursday. Core non-housing service inflation is expected to see at least a repeat of the 0.21% M/M from July, with six analysts between 0.20-0.35% M/M, while the BBG consensus expecting CPI for August to fall to 2.5% from 2.9% prior.
  • There was a $58b 3y bond auction overnight, awards at 3.44%, the lowest yield for the tenor since 2022 and 1.7bp lower than anticipated by the WI level with a bid-cover ratio of 2.66, slightly higher than the recent average of 2.56.
  • Projected rate cuts through year end have regained some ground after receding Monday into early Tuesday (*): Sep'24 cumulative -33.5bp (-32.7bp), Nov'24 cumulative -73.3bp (-71.8bp), Dec'24 -115.4bp (-112.0bp).
  • The Federal Reserve's top banking regulator Michael Barr on Tuesday said the biggest U.S. banks would face a 9% increase in capital requirements in a re-proposal of Basel endgame and G-SIB surcharge rules.