A Little Firmer In Asia

The overnight uptick in U.S. Tsys has seemingly been all about cross-market spill over from the ACGB space, which was linked to the Australian labour market report release that we have fleshed out in earlier bullets. TYM2 last +0-08+ at 121-02, just off recent session highs, operating in a 0-17+ range on volume of ~130K. The cash curve has bull steepened with yields running 1.5-4.5bp richer as 3s outperform and 30s lag.

• Note that some speculation re: imminent policy easing from China’s PBoC may be providing additional support, after Wednesday’s guidance from Premier Li ahead of tomorrow’s MLF operations (there is also speculation that a RRR cut may come ahead of the weekend). Note that the last week or so has seen the Chinese Premier provide several warnings re: economic growth, while the pro-growth pivot when it comes to wider policymaking has been well-documented in recent months, with the government looking to achieve an ambitious GDP growth target for calendar ’22.
• There may have also been an element of geopolitical risk in the uptick (the flagship Russian warship had to be abandoned due to a fire, while the U.S. continues to mull sending a senior official to Kyiv), although the lack of immediate reaction to those stories detracts from that particular avenue of explanation.
• A combination of the above factors allowed the space to unwind a modest round of early Asia cheapening and more.
• U.S. retail sales, weekly jobless claims, the prelim UoM survey and Fedspeak from Williams, Mester & Harker is due during Thursday’s holiday-shortened NY session (cash markets will close at 14:00 Eastern). Note that the latest ECB decision will provide some cross-market interest during early NY hours.