Assessing Wednesday's 2-Way Session

T-Notes unch. at typing, printing at 134-26+ after recovering from worst levels of Wednesday's session during the second half of NY trade.

• The cash Tsy curve saw some twist flattening on the day, with the belly representing the weakest point as 5s cheapened by ~3.0bp, while 20+-Year paper saw some marginal richening come the bell.
• A much softer than expected ADP employment reading (+330K vs. exp. +683K) helped T-Notes through technical resistance and triggered the usual debate re: correlation with NFP readings, as participants questioned the degree of "substantial further progress" toward the Fed's goals.
• The space then pulled back from best levels of the session on a stronger than exp. ISM services survey (which logged a record rate of expansion) and comments from Fed Vice Chair Clarida, who noted upside risks to his inflation projection while flagging his expectations that conditions for a rate hike will be in place by the end of '22 while noting that a '23 rate liftoff is "consistent with framework." He also pointed to a tapering announcement at some point in '21, providing his baseline assumptions hold. The space tagged fresh intraday lows on the back of the ISM-Clarida combo.
• There is nothing in the way of tier 1 risk events slated for Asia-Pac hours. Pre-NY focus will fall on the latest BoE decision, where the vote split surrounding the Bank's asset purchase facility and any comments on the sequencing review re: normalisation will be eyed. NY hours will be headlined by comments from Fed Governor Waller and Minneapolis Fed President Kashkari ('23 voter). We will also get the latest round of weekly jobless claims data.