Yields Under Pressure As ISM Beat, Fed Speakers Temper Rate Cut Expectations

TYH4 is trading at 110-27, - 02 from NY closing levels.

Treasuries remained under pressure in post-Asia dealings on Monday. The Mar'24 10Y futures closed at 110-25 (-28) back to pre-December FOMC levels, as the 10Y yield climbed to 4.1637%. Carryover weakness after Fed Chairman Powell's 60 Minutes interview on Sunday underscored a more cautious view, while stronger than expected ISM put further pressure on yields.

• In terms of technicals, the Mar'24 10Y futures hit a low of 110-22+ on Monday, below the Jan 19 support level of 110-26. Moreover, the close below 110-26 could now signal a bear trigger and see another move lower to the Dec 13 support of 110-16
• The ISM Services bounced more than expected in January to 53.4 (cons 52.0) after 50.5 in Dec – joint highest since Sept. Prices paid far stronger than expected 64.0 (cons 56.7) after 56.7 – highest since Feb’23 after the strongest monthly increase since mid-2012.
• Stronger than expected US data and Fed speakers' cautious tones around cutting interest rates have seen projected rate rates continue to retreat: March 2024 chance of 25bp rate cut is currently -16.4% vs. -18.3% from yesterday w/ cumulative of -4.1bp at 5.283%, May 2024 at -56.2% vs. -57.1% w/ cumulative -19.1bp at 5.133% while while June 2024 -81.9% from -82.4% w/ cumulative -39.6bp at 4.930%.
• Tuesday focus: no data, but several Fed speakers are scheduled: Cleveland Fed Mester economic outlook at 1200ET, MN Fed Kashkari moderated Q&A, livestreamed at 1300ET, Boston Fed Collins open remarks labor conference, livestreamed, no Q&A at 1400ET, Philly Fed Harker on Fed role in the economy, text, Q&A at 1900ET.