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Yields Higher on Heavy Corporate Issuance, Mixed Fed Speaker Tones

US TSYS
  • Treasury futures are a little off late session lows at the moment, likely tied to rate lock/hedge unwinds tied to nearly $37B high grade corporate issuance on the day. Partly seasonal, a return from summer market malaise, coupled with expectation the Federal Reserve is at or at least near the end of it's tightening cycle has reignited expectation of heavy supply.
  • Early dovish headlines from Fed Gov Waller, that last week's data "allows the Fed to proceed carefully .. no need to do anything imminently", saw Dec'23 10Y futures jump to 110-17 session high (yield 4.0284% low).
  • Support evaporated after Cleveland Fed Mester said the Fed might need to lift interest rates "a bit higher" on the back of stronger-than-expected economic data and upside inflation risks in an interview with German newspaper Boersen-Zeitung Tuesday.
  • "The latest indicators suggest that demand is somewhat stronger than expected, that the momentum in the economy is greater than thought," she said. "I can well imagine, from what I see so far, that we might have to go a bit higher, that we might have to raise the policy rate a bit more."
  • After a brief delay, FI futures are extended session lows after July Factory orders comes out better (less negative) than expected at -2.1% vs. -2.5% est (+2.3% prior), ex-trans +0.8% vs. +0.1% est (0.3% prior/revised).
  • Dec'23 10Y futures held above initial support at 109-28+ (Low Aug 29). Next support at 109-18+/09+ Low Aug 25 / 22 and the bear trigger.
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