Awaiting CPI

A Flat re-open for TYU2, last dealing -0-01+ at 118-19+, in line with late NY levels.

• Cash Tsys richened by 1-4bp on Tuesday, with the 5- to 7-Year zone outperforming,
• Recession talk continued to dominate markets on Tuesday, with weakness in equities and oil factoring into the bid for Tsys. Note that a soft German ZEW survey added to worry ahead of NY hours, building on the latest round of COVID-related fear surrounding China. The space revisited best levels of the day early in the NY morning (with the longer end of the curve managing to register fresh session lows in yield terms), before the space pulled back from best levels. The 2-/10-Year spread hit fresh cycle lows of ~-12bp, before moving away from session extremes, aided by a soft round of 10-Year supply.
• In terms of auction specifics, 10-Year supply tailed by 2bp, with the cover ratio moving further below its recent average, while dealer takedown moved further above its own recent average.
• Note that social media reports flagged a Jun CPI print of 10.2% Y/Y, which was highlighted and refuted by the Labor Department late in the day.
• In terms of market flow, large block buys in TU & FV futures dominated in NY hours.
• Chinese trade data and the latest RBNZ monetary policy decision headline during Asia-Pac hours. Meanwhile, Wednesday’s NY docket will be headlined by the aforementioned CPI print (see our full preview of that event here) & 30-Year Tsy supply.