TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 2+ TICKS HIGHER AT 110-10+

Analysis details (20:25)

T-Notes chop to miss in housing data and rising consumer inflation expectations. At settlement, 2s +1.0bps at 3.983%, 3s -0.5bps at 3.957%, 5s -1.4bps at 4.059%, 7s -1.8bps at 4.241%, 10s -1.9bps at 4.436%, 20s -2.2bps at 4.921%, 30s -2.5bps at 4.894% 

INFLATION BREAKEVENS: 5yr BEI +3.0bps at 2.433%, 10yr BEI +2.0bps at 2.355%, 30yr BEI +1.0bps at 2.307%.

THE DAY: T-Notes had been rising from overnight lows of 110-10 to a peak of 110-21+ in wake of the housing data and ahead of the US University of Michigan Consumer Sentiment data. The housing data was weaker than expected with both building permits and housing starts missing expectations. However, the sentiment data ultimately saw these gains pare with T-Notes falling back to the 110-10 handle and then meandering into settlement in quiet trade. The downside was largely due to the further rise in US consumer inflation expectations, with the 1yr rising to 7.3% from 6.5%, while the 5yr rose to 4.6% from 4.4%. However, the survey highlighted that the final release of this survey, due May 30th, will include updated sentiment and expectations to incorporate the latest rollback of tariffs between the US and China. Elsewhere in the data, sentiment was downbeat overall with a drop in both forward-looking expectations and current conditions. T-Notes settled slightly higher with the curve showing a flatter bias with the front end of the curve relatively unchanged, but long end yields were lower by c. 3bps. There is little fresh data out next week aside from the Flash S&P Global PMI data, while 20yr bond and 10yr TIPS supply will also be in focus, alongside a plethora of Fed speak jotted throughout the week. 

SUPPLY: 

• US Treasury to sell USD 16bln of 20yr bonds on May 21st to settle June 2nd; to sell USD 18bln of 10yr TIPS on May 22nd, to settle May 30th.


• US Treasury to sell USD 70bln of 6-week bills on May 20th, USD 68bln of 26wk bills on May 19th and USD 76bln of 13wk bills on May 19th; all to settle May 22nd.

STIRS/OPERATIONS:

• Market Implied Fed Rate Cut Pricing: June 2bps (prev. 2bps), July 9bps (prev. 10bps), September 23bps (prev. 25bps), Dec 52bps (prev. 56bps).


• NY Fed RRP op demand at USD 137bln (prev. 109bln) across 30 counterparties (prev. 25)


• EFFR at 4.33% (prev. 4.33%), volumes at USD 120bln (prev. 112bln).


• SOFR at 4.31% (prev. 4.29%), volumes at USD 2.686tln (prev. 2.543tln).

16 May 2025 - 20:25- ForexData- Source: Newsquawk