Asia Assesses The Post-CPI Vol.

TYZ2 deals a little below late NY levels, last 110-29.

• Cash Tsys finished Thursday’s session 4-17bp cheaper, comfortably off of worst levels.
• Firmer than expected CPI data allowed additional Fed rate hike premium to be baked in, with Nov dated OIS now pricing ~78bp of tightening and terminal rate pricing up to ~4.95%.
• Still, the space corrected from lows, as the major asset classes were subjected to notable two-way swings.
• At the fore of these wider gyrations was speculation surrounding a potential UK government U-turn re: its fiscal plan, another round of sizable BoE Gilt purchases, talk of fresh intervention in JPY and a notable rally in U.S. equities after the initial post-CPI shunt lower, facilitated by already very short positioning, further aided by the previously outlined headline flow and perhaps some buying related to technical analysis.
• In terms of Tsy market idiosyncrasies, a sizable block buy in TY futures (+14,278) and solid enough bidding metrics for 30-Year Tsy supply (despite a 1bp tail) helped the space away from lows.
• Chinese trade balance and CPI data provides the focal point of the Asia-Pac docket on Friday, although regional reaction to Thursday’s cross-market price movements will likely provide more impetus.
• Further out, Friday’s NY docket includes retail sales and the UoM sentiment survey (watch the inflation components in the latter). We will also get Fedspeak from Waller, Cook & George ahead of the weekend.