A Little Cheaper In Asia

The U.S. Tsy space has cheapened a little overnight, TYU1 last deals -0-03 at 131-22 (Sticking to a 0-03+ range), with cash Tsys bear steepening a little, as 30s cheapen by just over 1.0bp. There hasn't been much in the way of regional willingness to push back against Thursday's cheapening during Asia dealing, with the proximity to the elongated Memorial Day weekend and today's U.S. PCE reading perhaps keeping some sidelined, even with estimates pointing to an above average round of month-end extensions for the space.

• Cash Tsys softened across the board on Thursday, with 10s providing the weak point on the curve, cheapening by ~3.0bp come the bell. Weakness in Gilts, stemming from BoE rhetoric, dragged the space lower in the early rounds of NY dealing, with better than expected weekly initial jobless claims data and speculation surrounding U.S. President Biden's budget adding further downward impetus. Another round of firm supply from the Tsy, coming in the form of 7-Year issuance, helped the space off of lows, with the auction stopping through WI by 0.6bp, as the cover ratio ticked further above the recent averages and dealer participation slid further below its own recent averages. On the flow side, desks flagged real- & fast-money a/c's initiating 5-/30-Year steepeners during Thursday trade.
• April's PCE suite provides the focal point of Friday's local docket. The PCE reading will be supplemented by the release of the latest Chicago PMI survey, final UoM sentiment reading and inventories data. A reminder that Friday will bring an early close for the cash Tsy market ahead of Monday's Memorial Day holiday (which itself will see a shortened session for Tsy futures and no cash trade).