A Touch Cheaper As Asia Fades Modest Amount Of Month-End & Powell-Inspired Bid

The bulk of Wednesday’s rally held in Asia-Pac hours, although some of the month-end extension-related, and partially block-flow facilitated, rally that kicked in after the initial late NY bid surrounding Fed Chair Powell’s address faded overnight.

• That leaves cash Tsys 0.5-2.5bp cheaper into London hours, with the front end leading the modest cheapening. TYH3 deals just below the mid-point of its 0-08 range, last +0-16 at 114-00.
• There wasn’t much in the way of meaningful headlines to absorb overnight, with a slightly ‘less worse’ than expected Chinese Caixin manufacturing PMI print and headlines pointing to further COVID isolation tweaks in Beijing having little impact on the space.
• That left the fading of the month-end extension impulse and a couple of block sales in TY futures (2x 1,250 lots) at the fore.
• In terms of Fed pricing, FOMC dated OIS currently prices in 52bp of tightening for this month’s FOMC, with a terminal rate of just over 4.90% eyed. Both measures sit a little below pre-Powell levels.
• NY hours will be headlined by the PCE data suite, ISM manufacturing survey and Fedspeak from Bowman, Barr & Logan.