Asia-Pac Richening Holds

Tsys operate on the front foot through the Asia-London handover, aided by a bid in Bunds as Europe reacts to overnight moves.

• Benchmark Tsy yields are 2-3.5bp lower, with the wings lagging intermediates.
• TYZ3 is +0-08, 0-03 off Asia session highs, but through yesterday’s peak.
• The uptick in European natural gas, linked to strike action in Australia, has no tangible impact on Tsys.
• The Asia-Pac move lower in Tsy yields came against fresh FX intervention warning in Japan (following soft Japanese wage and final GDP data).
• It seemed to be a function of USD weakness, with no other headlines crossing at the time.
• It is also worth noting that the bid was stickier in Tsys than the weakness was in USD/JPY.
• Asia-Pac hours also saw Fed’s Logan (’23 voter) note that "another skip could be appropriate in September," although she stressed that "skipping does not imply stopping" with "more work left to do" re: inflation.
• FOMC-dated OIS is little changed on the day, showing a terminal rate of 5.44% come November, with ~41bp of cuts then showing through June ’24.
• Lower tier domestic data and comments on payments innovation from Fed’s Barr are unlikely to do much for markets in NY hours.