US TSYS: Extending Losses With US Filtering In, Waller and 20Y Ahead
Dec-17 12:06
Treasuries have reversed their rally on yesterday’s payrolls report, underperforming EGBs in the process, with moves extending as US desks filter in amidst a backdrop of solid gains for WTI futures (2.1%) following Trump ordering a blockade on Venezuela oil. Today’s front-end focus will be on Waller, although impact is likely limited by US CPI coming tomorrow, before the long-end sees a 20Y auction. Long after the close, Trump addresses the nation at 9pm ET – we could hear more on the Venezuela blockade whilst WH Press Sec Leavitt yesterday said it will include his historic accomplishments with a potential tease of 2026 policy.
- Cash yields are 2.1-3.6bp higher, with increases led by 20s/30s where today’s 20Y supply might be weighing at the margin.
- Curves consolidate yesterday’s modest pullback off fresh recent highs for 2s10s, currently at 66.8bps off yesterday’s 69.1bp. It came within sight of April’s 73.8bp for highs since early 2022.
- TYH6 trades at 112-09+ (-07) close to recent session lows but having remained within yesterday’s range throughout, amidst light cumulative volumes of 250k.
- The technical set-up points to a bearish outlook with support at the bear trigger of 111-29 (Dec 10 low) before 111-19 (Fibo projection). Resistance meanwhile is seen at 112-22+ (Dec 16 snap high on payrolls which also met the 50-day EMA) and 112-23 (Dec 11 high).
- Data: Weekly MBA data (0700ET), Chicago Fed CARTS indicator (0830ET), Manheim used vehicle prices mid-Dec update (0900ET)
- Fedspeak: Waller (0815ET), Williams (0905ET), Bostic (1230ET) – see STIR bullet
- Coupon issuance: US Tsy $13B 20Y Bond re-open - 912810UQ9 (1300ET). Last month’s 20Y saw surprisingly little reaction to it tailing by 0.4bps and a sizeable decline in bid-to-cover from 2.73 to 2.41. Last week’s 30Y at least saw some improved demand, with the bid-to-cover firming from 2.29 to 2.36 whilst it came in nearly in-line with a 0.1bp stop through.
- Bill issuance: US Tsy $69B 17W bill auction (1130ET)
- Politics: Trump address the nation (2100ET)
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Historical bullets
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US TSYS: Extending Highs
Nov-17 11:53
- Treasury futures extended the top end of the overnight range in the last 5 minutes, Dec'25 10Y tapped 112-24 before trading back to 112-23 (+6), 10y yield slips to 4.1173% low (-.0310).
- Treasuries last week challenged resistance at the 113-02 level, an area of congestion since Nov 5. This hurdle remains intact, however, a clear move above it would be a bullish signal and shift focus on resistance at 113-18+, the Oct 28 high. A break would also cancel a short-term bearish theme.
- The German 10Y Bund gained as well - but remains off overnight highs, Bbg US$ index firmer at 1217.70 (+1.42), stocks mildly higher (SPX eminis +19.75 at 6,775.00).
STIR: Fed December Pause Seen As ~50/50 Call As Official Data Resumes
Nov-17 11:52
- Fed Funds implied rates are unchanged from Friday’s close, holding last week’s push to a close call for December’s FOMC meeting between another 25bp cut or pausing.
- A pause is now seen as slightly more likely, supported by multiple Fed speakers with patient rhetoric.
- Cumulative cuts from an assumed 3.88% effective: 11bp Dec, 21bp Jan, 31bp Mar, 38.5bp Apr and 53bp Jun.
- SOFR futures are +0.005-0.025, with increases led by 2027 contracts.
- It sees the terminal implied yield remain within recent ranges, at 3.10% (SFRH7) between 3.06-3.16% that has been defined primarily by labor data and a strong ISM services report.
- Today’s data is light – Empire manufacturing for Nov and a delayed construction spending report for Aug – with some Fedspeak updates possibly more important (noted a little earlier). Nonfarm payrolls for September looms large on Thursday even if it is now two months old.
