Asia Assesses Re-Cheapening

TYZ2 deals unch. at 112-17 after the space edged away from worst levels of the session into the NY close.

• Cash Tsys were 6-12bp cheaper on Wednesday, with 7s leading the weakness, as the 2-10-Year curve continued to oscillate a little above cycle lows, while the 5-/30-Year yield spread flattened, but still sits ~25bp off of its cycle base.
• Marginally firmer than expected ISM services & ADP employment data (with the latter accompanied by a positive revision to the prior month), as well as weakness in Gilts, were catalysts for the cheapening, with a recovery from worst levels in equities also applying some pressure as we moved through NY hours.
• Wider swap spreads further out the curve also suggest payside flow in swaps applied further pressure to Tsys.
• Cleaner positioning also facilitated the move after some short covering in recent sessions, in the eyes of some desks.
• There isn’t anything in the way of tier 1 risk events slated for Asia-Pac hours.
• Weekly jobless claims data and a raft of Fedspeak headline Thursday’s NY docket.