TREASURY WRAP: T-NOTE FUTURES (H6) SETTLE 7 TICKS HIGHER AT 112-13+

TREASURY WRAP: T-NOTE FUTURES (H6) SETTLE 7 TICKS HIGHER AT 112-13+

• T-Notes gained after a softer-than-expected ISM Manufacturing PMI report.
• Oil prices initially weakened following the US capture of Venezuela's Maduro but later recovered.
• Market participants are focused on labour market data and potential changes in Fed leadership.

T-Note futures settled 7 ticks higher at 112-13+ as traders digested a softer-than-expected ISM Manufacturing PMI report, which provided upward momentum for T-Notes. The report indicated a decline in production and inventories, while prices paid remained unchanged and employment figures rose. This data has shifted market attention towards upcoming labour market reports, which could further influence Treasury yields.

During the US session, T-Notes experienced some pressure due to updates on corporate issuance and comments from Federal Reserve's Kashkari. Kashkari highlighted the cooling job market and persistent inflation, suggesting that the Fed might be nearing a neutral stance. This commentary, coupled with the ISM report, has traders closely monitoring potential shifts in monetary policy, especially with speculation around a possible replacement for Fed Chair Powell.

In the oil markets, the US capture of Venezuela's Maduro initially led to a dip in oil prices due to Venezuela's significant oil reserves. However, this decline was short-lived, and crude prices settled higher. Treasury traders are particularly attentive to the inflationary implications of fluctuating oil prices, as these could impact broader economic conditions and monetary policy decisions.

The US Treasury's recent auction saw $86 billion of 3-month bills sold at a high rate of 3.540% and $77 billion of 6-month bills at 3.475%. These auctions reflect ongoing demand for short-term government debt amidst current market conditions.

In the short-term interest rate markets, the implied Fed rate cut pricing remains unchanged for January, March, and April, with a slight increase for December. The NY Fed's reverse repo operations saw increased demand, indicating liquidity preferences among market participants.

Trader Insight:

• Some traders may consider monitoring US 10-Year Treasury yields for potential shifts in response to labour market data.
• Market participants are watching WTI crude for any further volatility following geopolitical developments in Venezuela.
• Analysts note that traders are assessing the impact of Fed commentary on financial sector ETFs like XLF.
• Observers are keeping an eye on the USD/JPY currency pair for reactions to US economic data releases.

Disclaimer: This is not trading advice. For informational purposes only.