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Yields Extend Late Session Lows - Back to Mid-Feb CPI Levels

US TSYS
  • Balanced commentary from several Fed speakers and the preview of Chairman Powell's monetary policy report to Congress next week has done little to forestall the drop in Treasury yields today.
  • Falling to 4.1759% this afternoon - 10Y yield is back to pre-CPI level on February 13 as markets take the latest round of data as supportive of softer policy as inflation metrics cool: lower than expected ISM Mfg (47.8 vs. 49.5 est), Prices Paid (52.5 vs. 53.2 est) and New Orders (49.2 vs. 52.7 est); as well as U. of Mich. Sentiment (76.9 vs. 79.6 est) while expectations are in line with estimates: 1 Yr Inflation (3.0% vs. 3.0% est) 5-10 Yr Inflation (2.9% vs. 2.9% est).
  • Lead quarterly Jun'24 10Y futures currently at 111-00.5 (+18.5) vs. 111-02, breached initial technical resistance of 110-26+ (20-day EMA) with next level at 111-07 (50-day EMA). Curves steeper 2s10s +2.520 at -34.543, 10Y yield 4.1798 (-.0704).
  • Short end support buoyed Mid-year projected rate cut pricing: March 2024 chance of 25bp rate cut currently -5.4% w/ cumulative of -1.4bp at 5.318%; May 2024 at -24.8% vs. -18.4% late Thursday w/ cumulative -7.6bp at 5.255%; June 2024 -67.9% from -56.4% late Thursday is nearing first full 25bp cut w/ cumulative cut -24.5bp at 5.086%. July'24 cumulative meanwhile has risen to -40.4bp at 4.927%.
  • Look ahead: data resumes Tuesday with S&P Global US Services PMI, ISM Services, Factory and Durable Goods Orders.

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