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Yields Gain Ahead Expected 25Bp Hike From Fed

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  • Front month US Treasury futures are near late session lows after the close (10Y yield at 3.5923%, 2Y yield at 4.1749% vs. 3.9126% overnight low), yield curves bear flattening (2s10s -8.305 at -58.091).
  • The main focus on Wednesday's FOMC policy announcement, 25bp hike widely anticipated. Otherwise there was little reaction to a surge in latest existing home sales data earlier: +14.5% to 4.58M SAAR vs. estimate of 4.2M +5%, while futures held near midday lows after $12B 20Y bond auction (912810TQ1) reopen tailed slightly: 3.909% high yield vs. 3.905% WI; 2.53x bid-to-cover vs. prior month's 2.54x.
  • Indirect take-up 67.03% vs. 75.3% prior month; direct bidder take-up 21.06% vs. 17.97% prior; primary dealer take-up climbs to 11.93% vs. 6.73%.
  • From a technical perspective, front month 10Y futures remain volatile as the price continues to pull away from yesterday’s high of 116-24. TYM3 currently at 114-07 (-28), above next support at 114-01+, the Mar 17 low and firmer support is seen at 113-12, the 50-day EMA.
  • A break of this average is required to signal a stronger reversal. A move higher higher would once again refocus attention on the key resistance zone between 116-24, yesterday’s high and 116-28+, the Jan 19 high. This zone is a bull trigger.
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  • Front month US Treasury futures are near late session lows after the close (10Y yield at 3.5923%, 2Y yield at 4.1749% vs. 3.9126% overnight low), yield curves bear flattening (2s10s -8.305 at -58.091).
  • The main focus on Wednesday's FOMC policy announcement, 25bp hike widely anticipated. Otherwise there was little reaction to a surge in latest existing home sales data earlier: +14.5% to 4.58M SAAR vs. estimate of 4.2M +5%, while futures held near midday lows after $12B 20Y bond auction (912810TQ1) reopen tailed slightly: 3.909% high yield vs. 3.905% WI; 2.53x bid-to-cover vs. prior month's 2.54x.
  • Indirect take-up 67.03% vs. 75.3% prior month; direct bidder take-up 21.06% vs. 17.97% prior; primary dealer take-up climbs to 11.93% vs. 6.73%.
  • From a technical perspective, front month 10Y futures remain volatile as the price continues to pull away from yesterday’s high of 116-24. TYM3 currently at 114-07 (-28), above next support at 114-01+, the Mar 17 low and firmer support is seen at 113-12, the 50-day EMA.
  • A break of this average is required to signal a stronger reversal. A move higher higher would once again refocus attention on the key resistance zone between 116-24, yesterday’s high and 116-28+, the Jan 19 high. This zone is a bull trigger.