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Bear Steeper After China Policy Action, Flow

US TSYS
  • Cash Tsys have bear steepened, having come under pressure along with core FI more generally in Asian trade after China held the 5-Year LPR steady at 4.20% (vs 15bp cut expected), with 1-Year LPR cut 10bp (vs 15bp cut expected).
  • An initial paring of losses has since been reversed with major benchmarks pushing lower again, aided by recent futures flow including a 7.9k block FV sale, and with further flow/headlines likely driving the upcoming session amidst a very light docket.
  • 2YY +3.0bp at 4.973%, 5YY +3.8bp at 4.423%, 10YY +4.8bp at 4.302%, and 30YY +6.0bp at 4.435%. The steepening pushes 2s10s back to -67bps to move closer to Thursday’s -64bps for highs since May.
  • TYU3 trades 10 ticks lower at 109-10+ off session lows of 109-09 as the bear cycle remains in play, albeit under lower than recent average volumes with 260k after last week’s more elevated activity. Support is seen at 109-03+ (Aug 17 low) after which lies 109-00 before a major support at 108-26+ (Oct 21, 2022 low).
  • Bill issuance: US Tsy $69B 13W, $62B 26W bill auctions (1130ET)
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