US DATA: Construction Momentum Softening Amid Month-To-Month Volatility

Tsy futures are holding a lower/narrow range, curves mildly flatter (2s10s -0.114 at 66.046) ahead of the $69B 2Y note auction (91282CPS5) at 1300ET, WI currently at 3.492% -- 0.3bp cheap to last months tail: 

• November recap: Tsy futures scaled off highs after the $69B 2Y note auction (91282CPL9) tailed slightly: 3.489% high yield vs. 3.487% WI; 2.68x bid-to-cover vs. 2.59x prior.
• Peripheral stats: Indirect take-up rose to 58.07% from 53.65% prior, directs up to 30.74% vs. 34.77% prior, primary dealer take-up 11.18% vs. 11.58% prior.

ECB’s Schnabel has said in a FAZ podcast that she didn’t say rates should be raised and that she doesn’t expect rate hikes for the foreseeable future with rates probably stable for quite some time. 

• A reminder of her remarks from Dec 8: "Interest rates are in a good place, and in the absence of larger shocks, I expect them to stay in this place for some time. The distribution of inflation risks has shifted to the upside, and accordingly, both markets and survey participants expect that the next rate move is going to be a hike, albeit not anytime soon."
• When then asked on market expectations for a hike she had said "I’m rather comfortable with those expectations”, but it’s worth remembering that these were for marginal hiking expectations come end-2026. 

• +5,000 TYH6 112-12.5, post time offer at 1153:01ET, DV01 $335,000.
• The 10Y contract trades 112-12 last (-4)