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Bear Steepening In Asia


Tsy trade lacked an overt catalyst during Asia hours, with the late NY bounce in equities extending, allowing Tsys to move further away from Thursday’s best levels, with bear steepening in play. This comes after Thursday’s bull steepening was driven by general recession fears and worry re: COVID in China.

  • The S&P 500 e-mini is +1.0%, aided by a tech-led rally in both Hong Kong & the U.S.
  • That leaves the major cash Tsy benchmarks 2.5-5.0bp cheaper on the day, with TYM2 last printing -0-16+ at 119-15+, 0-05+ off the base of the contract’s 0-13+ session range, on volume of ~105K.
  • A lack of meaningful headline flow meant sporadic bursts of activity were in the driving seat during Asia-Pac hours.
  • Late NY rhetoric from Fed Chair Powell had nothing in the way of meaningful impact on the space, as he reiterated his preference for 50bp hikes at the next couple of meetings, while indicating two-way risks around wider tightening i.e. an ability to do more or less dependent on the evolution of economic matters, as he stressed that inflation is “way too high.” Powell also noted that the Fed’s ability to engineer a soft landing may be based on factors that are outside of its control. Earlier Thursday saw U.S. Tsy Sec Yellen reiterated her hope that the Fed will be able to fight off inflation without causing a recession.
  • U.S. hours will bring terms of trade data, in addition to the latest UoM sentiment reading and Fedspeak from Mester (’22 voter) & Kashkari (’23 voter).
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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