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Yields Mark 16 Year Highs Ahead Wed's FOMC Rate Announcement

US TSYS
  • Treasury futures have quietly extended session lows after the bell, yields climbing to the highest levels since November 2007 (10YY 4.367%, 5Y 4.5205%). Generally subdued in the lead-up to Wednesday's FOMC policy annc with SEP/dot projections at 1400ET.
  • Traders expect the Fed to keep rates on hold with a tightener bias ahead while the median of analysts’ expectations for the Fed’s September Dot Plot rates suggest that the central expectation is for no changes from June’s projections: 5.6% for 2023, 4.6% for 2024, 3.4% for 2025, with the new entry for 2026 at 2.6%, and the Longer-Run rate at 2.5%.
  • Little react to this morning's data with a brief flurry of two way trade after higher than expected Building Permits (1.543M vs. 1.440M est, 1.443M prior/rev), MoM (6.9% vs -0.2% est) while Housing Starts comes out softer (1.283M vs. 1.439M), MoM (-11.3 vs. -0.9% est, 2.0% rev/prior).
  • Rates recovered some ground in the first half as early Greenback weakness reversed, only to reverse course in the second half with TYZ3 trading just above technical support of 109-03 (bear trigger).
  • Little change -- Tsy futures still hold weaker levels after $13B 20Y bond auction reopen (912810TU2) draws 4.592% high yield vs. 4.592% WI; 2.74x bid-to-cover vs. prior month's 2.56x.
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