A Calmer Session

TYM2 trades around late NY levels, flat at 120-19 as of typing.

• To recap, softer than expected durable goods data provided a bit of a bid during early NY dealing, allowing the space to extend to fresh session highs after firming a touch during the European morning. Tsys then pared back from best levels of the session as equity markets regained some poise, although Wednesday proved to be a rangebound affair for the former. Cash Tsys saw some light twist steepening come the close, with the major benchmarks running 2.0bp richer to 0.5bp cheaper, as the curve pivoted around 20s.
• The minutes covering the most recent FOMC meeting failed to unearth anything in the way of fresh, meaningful information, with the fight against inflation front and centre, broad support for the well-trodden 50bp hikes over the next couple of meetings and clear acceptance that "a restrictive policy stance may well become appropriate depending on the evolving economic outlook and the risks to the outlook." Elsewhere, many participants were of the view that “expediting the removal of policy accommodation would leave the Committee well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.” The minutes also noted that “financial conditions “had tightened by historically large amounts since the beginning of the year,” although there was a reference which noted that “valuations of many assets remain elevated,” in addition to some worry that QT may impact liquidity in the Tsy space (not a new train of thought). While the minutes maintained a hawkish tone, there was nothing to shock.
• 5-Year Tsy supply tailed by 0.4bp, with the cover ratio holding steady around the recent average, while dealer takedown was incrementally higher, but remained a shade below its own recent average.
• There isn’t much in the way of tier 1 macro data due during Asia hours, although the BoK monetary policy decision will provide some interest. Thursday’s NY session will include weekly jobless claims & pending home sales data, the latest Kansas City Fed manufacturing activity survey, revised Q1 GDP readings and 7-Year Tsy supply. Elsewhere, Fedspeak will come from San Francisco Fed President Daly (’24 voter) and Vice Chair Brainard (on digital currencies).