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Why Are Tsy Yields Higher After PCE?


Why the backup in Tsys post-data (with yields higher), even as headline PCE prints provided a modest undershoot vs. BBG consensus? We point to a few factors:

  • The amount of richening already witnessed in recent times with the data not providing enough of a catalyst to promote an extension (market looking for even softer data, known revisions to the distribution of yesterday’s quarterly core PCE data were about as hawkish as they could have been).
  • Seasonals seemingly skewing the weekly jobless claims prints higher, making the underlying data less worrisome than headlines.
  • Most of the curve not wanting to push beyond yesterday’s month-to-date (and for 2s, multi-month) lows in yields, save a brief look below in the longer end during early Asia-Pac trade.
  • Long positioning, both in terms of recent biases on the SOFR strip and in Tsys (with net long measures in the JPM U.S. Tsy client survey hitting decade/survey history highs), narrows the scope for fresh capital to be put to work.
  • New York Fed President Williams not closing the door re: further tightening if deemed necessary (data dependent), while stressing that policy must remain restrictive for quite some time.
  • San Francisco Fed President Daly (who has tended to come down on the dovish side in the past) playing down the need to think about rate cuts.
  • Fresh upticks in crude oil futures on latest OPEC+ headlines.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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