2s10s Hits Fresh Cycle Extreme

A flat re-open for TYZ2, which deals around late NY levels.

• The curve twist flattened on Wednesday, with the major cash Tsy benchmarks running 2bp cheaper to 12bp richer on the day, pivoting around 3s. This allowed the 2-/10-Year curve to move to fresh cycle extremes when it comes to the degree of inversion witnessed.
• Firmer than expected retail sales data and continued hawkish Fedspeak (pushing back against the idea of a near-term pause in rate hikes, even with a step down in the pace of tightening in the offing) left the very front end of the curve in negative territory at the close. Softer than expected industrial production readings, a stellar 20-Year auction and weakness in equities provided supportive factors.
• On the flow side, a pre-auction block buy in WN futures (+2.5K) aided the flattening theme.
• A general belief that the missile that hit Poland on Tuesday (killing 2 civilians) was a case of ‘friendly fire,’ likely coming from Ukrainian defence systems, as opposed to being fired by Russia, as well as firmer than expected UK inflation data, applied pressure to wider core global FI markets through early London hours, before a bid kicked in.
• Australian labour market data headlines the Asia-Pac docket on Thursday but is unlikely to be a major market mover for Tsys. Further out, a deluge of Fedspeak headlines the NY docket on Thursday, with weekly jobless claims data, housing starts, building permits and regional Fed economic activity indicators also slated for release.