Bear Steepening After 2-Way Asia Trade

Early Asia-Pac trade saw Wednesday’s risk-negative mood spill over, although the S&P 500 e-mini’s failure to make a meaningful, lasting break below the 4,000 mark allowed wider risk appetite to stabilise. Touted Japanese demand for USD/JPY provided some cross-market impetus, while an uptick in throughput at the Shanghai port and further positive developments surrounding Shanghai’s removal of COVID restrictions fuelled the wider recovery from lows in equity indices (the S&P 500 e-mini is now 0.2% higher on the session).

• This applied pressure to the U.S. Tsy curve, which managed to bear steepen, with the major cash benchmarks running 0.5-3.0 cheaper into London hours. TYM2 currently prints -0-06+ at 119-07+, 0-01+ off the bottom of its 0-14 range, on volume of ~145K. A screen lift of TYM2 which saw paper pay 119-08 up to 118-09 on ~4.6K helped the contract and wider space find a bit of a base.
• Thursday’s NY session will see the release of existing home sales data, the latest Philly Fed business survey and weekly jobless claims prints. We will also hear from Minneapolis Fed President Kashkari (’23 voter) and get 10-Year TIPS supply.