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US TSYS: Yields Gap Higher But Buyers Emerge Late.

US TSYS
USGlobalBulletMarketsFixed Income BulletsRegionNorth America

• Treasuries sold off in the US throughout Wednesday, led by the long end, as the US Election results trickled in and investors extrapolated higher growth, higher inflation and less Federal Reserve rate cuts next year.
• Data out in the US overnight pointed to activity in the services sector as being robust as per the various ISM releases. Headline ISM was up at +56 (+54.9 prior) and the employment subcomponent unexpectedly expanded at +53 (+49.1 prior), making it the highest reading since late 2023. Additionally, the forward-looking new orders component remained firmly in expansion at +57.4.
• A decent $25B 30Y auction (912810UE6) drew 4.608%, the highest level since May, yet still below pre-auction indication pointing to strong demand as indicated by 2.64x bid-to-cover vs. 2.50x in the prior month. The next 30Y auction is tentatively scheduled for December 12.
• As market commentators shifted their focus on not only the upcoming FED meeting on November 08, but their forecasts for 2025, the sell off in TSYS was focused on the long end.
• Put buying turned more two-way in addition to some chunky call structure buying as underlying futures see-sawed off session lows in the second half of the trading day. While chances of a a 25bp cut hold steady, projected rate cuts into early 2025 have cooled vs. late Tuesday levels (*): Nov'24 cumulative steady at -24.6bp, Dec'24 -42.7bp (-44.2bp), Jan'25 -52.7bp (-57.7bp), Mar'25 -68.4bp (-74.6bp).
• Yields close the US session higher across the board following the 8-17bp move across the curve. 2YR 4.266% (+8.3bp) ; 5YR 4.276% (+12.5bp) ; 10YR 4.435% (+16.2bp) ; 30yr 4.614% (+17.6bp). The moves see the 10YR back at levels no seen since May (see chart attached).

• TSY Futures fell heavily on the Trump reflation view moving from an intraday high of 110-21to lows of 109-07. The bounce off that level came via large block trades (5,000 contracts TUZ4, 6,900 contracts FVZ4 and a large curve steepener 5YR/30YR +31k / - 6k contracts) as re-positioning trades emerged as the results became clearer.
• Wednesday’s sell off in US government bonds was the worst single day move in the last five years.
• As futures open in Asian trading time at 109-16 unchanged with volumes low so far.

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• Treasuries sold off in the US throughout Wednesday, led by the long end, as the US Election results trickled in and investors extrapolated higher growth, higher inflation and less Federal Reserve rate cuts next year.
• Data out in the US overnight pointed to activity in the services sector as being robust as per the various ISM releases. Headline ISM was up at +56 (+54.9 prior) and the employment subcomponent unexpectedly expanded at +53 (+49.1 prior), making it the highest reading since late 2023. Additionally, the forward-looking new orders component remained firmly in expansion at +57.4.
• A decent $25B 30Y auction (912810UE6) drew 4.608%, the highest level since May, yet still below pre-auction indication pointing to strong demand as indicated by 2.64x bid-to-cover vs. 2.50x in the prior month. The next 30Y auction is tentatively scheduled for December 12.
• As market commentators shifted their focus on not only the upcoming FED meeting on November 08, but their forecasts for 2025, the sell off in TSYS was focused on the long end.
• Put buying turned more two-way in addition to some chunky call structure buying as underlying futures see-sawed off session lows in the second half of the trading day. While chances of a a 25bp cut hold steady, projected rate cuts into early 2025 have cooled vs. late Tuesday levels (*): Nov'24 cumulative steady at -24.6bp, Dec'24 -42.7bp (-44.2bp), Jan'25 -52.7bp (-57.7bp), Mar'25 -68.4bp (-74.6bp).
• Yields close the US session higher across the board following the 8-17bp move across the curve. 2YR 4.266% (+8.3bp) ; 5YR 4.276% (+12.5bp) ; 10YR 4.435% (+16.2bp) ; 30yr 4.614% (+17.6bp). The moves see the 10YR back at levels no seen since May (see chart attached).

• TSY Futures fell heavily on the Trump reflation view moving from an intraday high of 110-21to lows of 109-07. The bounce off that level came via large block trades (5,000 contracts TUZ4, 6,900 contracts FVZ4 and a large curve steepener 5YR/30YR +31k / - 6k contracts) as re-positioning trades emerged as the results became clearer.
• Wednesday’s sell off in US government bonds was the worst single day move in the last five years.
• As futures open in Asian trading time at 109-16 unchanged with volumes low so far.