2s10s Dragged Steeper On Two-Way Tuesday

TYZ2 operates around late NY levels, a little above Tuesday’s low.

• Cash Tsys were 5bp richer to 8.5bp cheaper across the curve on Tuesday, twist steepening, pivoting around 5s.
• The 2-/10-Year yield curve now sits ~25bp off cycle lows after last week saw the spread fail to breach the deepest levels of inversion witnessed during the current cycle.
• U.S. data was generally firmer than expected, albeit with some of it second tier in nature.
• Hawkish Fedspeak continued with Bullard still leading the charge.
• Fallout from the UK “mini” budget continued to dominate, with hawkish rhetoric from BoE chief economist Pill noted.
• That combination helped pull Tsys lower during NY dealing after a rally through Asia-Pac & London hours that had little in the way of meaningful headline catalyst (early bids in equities & USD weakness also reversed), with a London morning rally in Gilts helping (pre-Pill related cheapening).
• The recent run higher in yields and worry re: continued vol. saw the latest 5-Year auction generate a tail of over 2bp, with the cover ratio slipping further below the recent average.
• An address from San Francisco Fed President Daly headlines during Asia hours. Further out, Gilt market moves will continue to be eyed, with second tier data, 7-Year Tsy supply and Fedspeak from Powell, Bowman, Bullard, Bostic, Evans & Barkin due in NY hours.