Bear Flattening Overnight

TYU2 is -0-06 at 118-21 ahead of London dealing, 0-01+ off the base of its 0-10 Asia-Pac range, on limited volume of ~51K. Cash Tsys run 2-4bp cheaper across the curve, bear flattening after yesterday’s bull steepening.

• Early cash Tsy trade saw some light cheapening aided by news that Chinese President Xi & Russian President Putin will be attending the G20 summit in Indonesia, which is due to take place in November. A reminder that there is an expectation that U.S. President Biden will speak with Xi in South East Asia in November, owing to previous press reports and the U.S. confirming that planning for such a meeting is underway. In addition, the Kremlin had previously flagged Putin’s desire to attend the November summit, meaning that this headline flow doesn’t come as much of a shock. Cross-asset moves aren’t definitively risk-off or -on in nature, with e-minis marginally lower, the USD bid and Tsys cheaper. Note that some suggested that Putin’s presence could bolster the Sino-Russian power axis at the meeting, with no firm consensus amongst the remainder of the G20 re: his attendance of the summit (although we don’t believe such a view is driving market moves given the leg higher in USD/JPY, with the USD strength aided by a technical break through Thursday’s high in the BBDXY).
• The cheapening then extended later in the session as Aussie bonds leaked lower, with little in the way of fresh, overt headline drivers noted (next week’s AOFM issuance schedule perhaps provided some background pressure for ACGBs).
• Friday’s NY session will be headlined by Fedspeak from Richmond Fed President Barkin (’24 voter).