Bid In Bunds Spills Over

Cash Tsys sit 0.5-2.5bp richer, with 7s presenting the firmest point on the curve, with a firm round of early European trade for Bunds spilling over. TYM3 trades through its overnight peak, last +0-02+, looking above yesterday’s high.

• Softer than expected Chinese inflation data headlined overnight, although didn’t provide much in the way of a catalyst for the Tsy sphere.
• While it would not have factored into this morning’s move, at least overtly, we re-flag the latest piece from WSJ “Fed whisperer” Timiraos (click for full article), ran in NY hours, which noted that “Federal Reserve officials were already leaning toward taking a summer vacation from interest rate increases to see if they have done enough to slow the economy and inflation. Wednesday’s inflation report makes that easier because it showed price pressures aren’t worsening and might soon be slowing.”
• FOMC-dated OIS pricing remains steady, showing ~75bp of cuts by year-end, and 100bp of cuts by the end of the Jan ’24 FOMC.
• Looking ahead, the latest BoE decision provides the headline risk event on Thursday’s wider macro docket, while NY hours will see PPI data, weekly jobless claims readings, 30-Year Tsy supply and Fedspeak from Waller & Kashkari.