US TSYS: Tsys Curves Bear-Steepen, Trumps Confirms Tariffs

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.615/851 - High Dec 31 / High Dec 11 
• PRICE: 95.530 @ 16:11 GMT Jan 28
• SUP 1: 95.275 - Low Nov 14  (cont) and a key support 
• SUP 2: 94.477 - 1.000 proj of the Dec 11 - 23 - 31 price swing
• SUP 3: 94.495 - 1.0% 10-dma envelope

The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851, and has traded through the Dec low. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish theme. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.  

• Tsys futures have close slightly lower on Tuesday, however well off session lows following strong demand for the final auction of the week, while a couple of block trades near the end of the session pushed futures a touch higher.
• Block buyers in FV contracts saw the 5yr yield outperform the rest of the curve, although futures volumes were well below recent averages. TU closed -00⅝ at 102-28⅜, while TY closed -04 at 109-01.
• Cash tsys yields closed -1bps to +0.5bps, as the curve steepened, there was a block 5s10s steepener that supported the moves. The 2yr closed -0.4bps at 4.195%, while the 10yr closed -0.2bps at 4.532%. The 2s10s was little changed at 33.33, while 5s20s rose 1.5bps to 50.627.
• The 7yr auction drew 4.457%, 0.9bp lower than its yield in pre-auction trading at the bidding deadline, with respectable bidding metrics; 9.9% primary dealer award was higher than previous as indirect award dropped to 67.1%, offsetting increase in direct award to 23.1%; auctions of 2- and 5-year notes on Monday were also well-bid.
• Traders are increasingly bullish on tsys ahead of the Fed's rate decision, hoping Powell signals a potential rate cut in March. Swaps show a 30% chance of a March cut, though the Fed is expected to hold rates steady this week. Recent stock market turmoil and cooling inflation have driven long positions in Treasuries to their highest levels in nearly 15 years. The premium on tsys options have flipped to calls for the first time this year.
• Later today we have Wholesale Inventories, but focus will quickly turn to the FOMC decision later on in the session.

• RES 3: 97.190 - High May 5 2023
• RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg 
• RES 1: 96.190/360 High Dec 31 & Jan 27 / High Dec 11  
• PRICE: 96.150 @ 16:08 GMT Jan 28
• SUP 1: 95.830 - 1.000 proj of the Dec 11 - 20 - 31 price swing  
• SUP 2: 95.760 - Low 14 Nov ‘24
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

A bear cycle in Aussie 3-yr futures remains intact and short-term gains are considered corrective. The recent move down reinforces the bear theme and the contract has traded through the December low. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low. On the upside, a clear reversal would instead signal scope for an extension towards 96.190, the Dec 31 & Jan 27 high, and 96.360, the Dec 11 high.