US TSYS: Cash Curve Returns On A Bull Flattening Note With Short End Static
The Treasury curve bull flattened Tuesday in the return to cash trade after Monday's holiday, with Trump administration policy remaining the focus after the presidential inauguration.
- TY futures had rallied Monday (amid the cash close), with gains peaking in overnight trade Tuesday, as markets caught up to varying Trump tariff headlines (President Trump clarified Monday his administration may impost 25% tariffs on Mexico and Canada at the beginning of Feb).
- Data was limited: the January Philly Fed non-manufacturing survey was soft, and coming out alongside a below-expected Canadian CPI figure, it helped a nascent morning bid for Treasuries, but ultimately pulled back thereafter with futures closing fairly flat to Monday's early close.
- With 2025 Fed rate cut expectations fairly static (and the FOMC is in its pre-January meeting blackout period), the Treasury short end remained anchored.
- A lack of movement in the 2Y segment means the Treasury curve is as flat as it's been this year across key segments: 2s10s are -5.2bp at 28.6bp (entered 2025 at 32.5bp, January high of 42.9bp); 2s5s -3.2bp at 11.2bp (opened 2025 at 13.5bp).
- Wednesday's data calendar remains light, with MBA mortgage data and the December Leading Index - more focus will be on $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.
- Latest cash levels: The 2-Yr yield is down 0.9bps at 4.2741%, 5-Yr is down 4.1bps at 4.3904%, 10-Yr is down 6.3bps at 4.5642%, and 30-Yr is down 6.4bps at 4.7927%. The Mar 25 T-Note future is up 7.5/32 at 108-25, having traded in a range of 108-085. to 109-04.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
