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US TSYS: Yields Richer Following PPI, Reciprocal Tariff Implementation Delay

US TSYS
USBulletMarketsFixed Income BulletsNorth America
  • Tsys futures rallied during the US morning session following a strong PPI print that kept existing forecasts intact for the core PCE , tsys largely erased the sharp Wednesday selloff spurred by hot CPI data. The gains on the day were led by the long-end, with the sale of $25b 30yr bonds being easily digested. Bid was maintained into the close after President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners. TU closed +03+ at 102-21¼, TY closed +0-22+ at 108-31
  • Cash tsys curves bull-flattened, with yields closing 4.5bps to 10bps richer. The 2yr closed -4.8bps at 4.307%, while the 10yr closed -8.8bps at 4.529%. The 2s10s fell 4.5bps to 21.791, the 2s30s fell 5bps.
  • The PCE-relevant components of PPI have clearly set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected. Overall PPI final demand inflation printed at 0.40% M/M sa (cons 0.3) after a heavy upward revision of 0.50% (initial 0.22) in Dec although that was partly offset by a downward revised 0.23% (initial 0.38) in Nov.
  • Projected rate cuts through mid-2025 steady to slightly firmer vs. Thursday (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -3.9bp, Jun'25 at -11.1bp (-9.8bp), Jul'25 at -15.1bp (-13.6bp).
  • The market is still pricing in the first rate cut in October, after briefly pushing out the first cut expectation to December following CPI on Wednesday, note there is no meeting in November.
  • Focus now turns to Retail Sales later tonight, followed by Industrial Production later in the session
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  • Tsys futures rallied during the US morning session following a strong PPI print that kept existing forecasts intact for the core PCE , tsys largely erased the sharp Wednesday selloff spurred by hot CPI data. The gains on the day were led by the long-end, with the sale of $25b 30yr bonds being easily digested. Bid was maintained into the close after President Donald Trump ordered his administration to consider imposing reciprocal tariffs on numerous trading partners. TU closed +03+ at 102-21¼, TY closed +0-22+ at 108-31
  • Cash tsys curves bull-flattened, with yields closing 4.5bps to 10bps richer. The 2yr closed -4.8bps at 4.307%, while the 10yr closed -8.8bps at 4.529%. The 2s10s fell 4.5bps to 21.791, the 2s30s fell 5bps.
  • The PCE-relevant components of PPI have clearly set the tone with the market's dovish reaction to the release but the aggregate series were still notably stronger than expected. Overall PPI final demand inflation printed at 0.40% M/M sa (cons 0.3) after a heavy upward revision of 0.50% (initial 0.22) in Dec although that was partly offset by a downward revised 0.23% (initial 0.38) in Nov.
  • Projected rate cuts through mid-2025 steady to slightly firmer vs. Thursday (*) as follows: Mar'25 steady at -0.5bp, May'25 steady at -3.9bp, Jun'25 at -11.1bp (-9.8bp), Jul'25 at -15.1bp (-13.6bp).
  • The market is still pricing in the first rate cut in October, after briefly pushing out the first cut expectation to December following CPI on Wednesday, note there is no meeting in November.
  • Focus now turns to Retail Sales later tonight, followed by Industrial Production later in the session