A Touch Firmer In Light Overnight Trade

An early bid in Tsy futures extended on the cash Tsy re-open, with Asia-Pac participants reacting to Thursday’s unwind of some of the post-CPI Fed rate hike premium, which came as two of the more hawkish FOMC voters (Waller & Bullard) outlined their current preference for a 75bp rate hike to be deployed later this month (FOMC dated OIS pricing for the July meeting has eased back to ~83bp of tightening vs. a peak of ~93bp as a result of the comments). TYU2 last deals 0-01+ shy of session highs, +0-04+ at 118-20+, operating in an 0-09 range thus far, while cash Tsys sit 0.5-2.5bp richer across the curve, bull steepening, with the belly outperforming. Note that wider futures volumes are very limited, with TYU2 not even hitting ~35K lots of turnover.

• Soft GDP data out of China would have done the bid no harm, but there was no market reaction to the figures. The post-GDP NBS press conference saw China reaffirm the idea that its economic bounceback from May is not on firm ground, stressing that it will do what is required to make sure that the economy operates “within a reasonable range,” while being a little more explicit re: the challenges it faces (both structural & cyclical). The attainment of the country's annual GDP growth target looks to be a huge challenge at present, with wider recession worries in the U.S. & Europe, coupled with domestic property market headwinds and the country’s zero COVID strategy providing the most obvious obstacles to growth.
• Retail sales data and the inflation expectations component of the latest UoM sentiment survey will headline during NY hours (after Waller and Mester flagged those releases as potential trigger points for a larger rate hike later this month). Fedspeak from Bullard (’22 voter), Bostic (’24 voter) & Daly (’24 voter) is also scheduled, with the potential for further impromptu Fedspeak apparent ahead of the pre-FOMC blackout period, which gets underway on Saturday.