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Bear Flattening As Terminal Rate Climbs Further

US TSYS
  • Cash Tsys extend yesterday’s cheapening with a modest bear flattening as Fed terminal and 2023 rate expectations broadly climb higher still, with a boost overnight from hawkish RBA views. Little obvious impact initially on a collection of stronger than expected China data but it has potentially helped the long end continue to cheapen through European hours, trading in line with core EU FI.
  • 2YY +3.6bps at 3.901%, 5YY +2.0bps at 3.686%, 10YY +2.2bps at 3.471%, 30YY +2.2bps at 3.487%.
  • TYZ2 sits 2+ ticks lower at 114-13+ with a session low of 114-10+ clearing yesterday’s low and moving ever closer to key support at 114-06 (Jun 14 low).
  • Data: Focus is on the U.Mich preliminary consumer survey for Sep, the last significant release bar housing data prior to next week’s FOMC. Looking to see if sentiment maintains August’s larger than expected bounce and whether inflation components continue to ease or maintain levels off cycle highs.
  • No issuance today.

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