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Yld Curves Bull Flatten Ahead FOMC, Early ADP Employ Data

US TSYS

US Rates traded mixed Tuesday, futures rebounded from the week opener's broad based sell-off, curves bull flattening (2s10s -4.060 at 20.487) as long end rates outperformed in the lead-up to Wednesday's FOMC policy annc at 1400ET (Chairman Powell presser at 1430ET).

  • Front end support in Eurodollar futures reversed in late trade, however, White pack (EDM2-EDH3) trading -0.005 in the lead quarterly to -0.050 across the balance of the strip. While market expectations of multiple 50bp hikes has expanded to 250bp by year end, the late reversal in the short end has some desks pondering a more aggressive forward guidance from the Fed may be revealed soon.
  • Goldman Sachs agrees with consensus on a 50bp hike and QT announced at the May meeting, and they say the key question is what comes next. Despite Bullard raising the possibility of 75bp hikes in future, this is unlikely (but not implausible under certain circumstances).
  • Aside from the FOMC, Wednesday data focus on ADP Employment Change (455k, 385k) at 0815ET that may provide some incite to Friday's Nonfarm Payrolls for April (+390k est vs. +431k prior).
  • The 2-Yr yield is up 3.9bps at 2.7702%, 5-Yr is up 0.4bps at 3.0081%, 10-Yr is down 1.2bps at 2.9692%, and 30-Yr is down 1.6bps at 3.0167%.
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US Rates traded mixed Tuesday, futures rebounded from the week opener's broad based sell-off, curves bull flattening (2s10s -4.060 at 20.487) as long end rates outperformed in the lead-up to Wednesday's FOMC policy annc at 1400ET (Chairman Powell presser at 1430ET).

  • Front end support in Eurodollar futures reversed in late trade, however, White pack (EDM2-EDH3) trading -0.005 in the lead quarterly to -0.050 across the balance of the strip. While market expectations of multiple 50bp hikes has expanded to 250bp by year end, the late reversal in the short end has some desks pondering a more aggressive forward guidance from the Fed may be revealed soon.
  • Goldman Sachs agrees with consensus on a 50bp hike and QT announced at the May meeting, and they say the key question is what comes next. Despite Bullard raising the possibility of 75bp hikes in future, this is unlikely (but not implausible under certain circumstances).
  • Aside from the FOMC, Wednesday data focus on ADP Employment Change (455k, 385k) at 0815ET that may provide some incite to Friday's Nonfarm Payrolls for April (+390k est vs. +431k prior).
  • The 2-Yr yield is up 3.9bps at 2.7702%, 5-Yr is up 0.4bps at 3.0081%, 10-Yr is down 1.2bps at 2.9692%, and 30-Yr is down 1.6bps at 3.0167%.