Breakevens Support The Bid On Wednesday

A flat re-open for TYU2, last dealing +0-02 at 117-18+.

• A narrowing of breakevens helped support the U.S. Tsy space on Wednesday, with 5-Year BEIs registering fresh YtD lows. A softer than expected round of regional German CPI data out of NRW (albeit largely driven by technicalities and short-term one-off discounts) helped support the space in early European dealing, before firmer than expected Spanish CPI and wider realisation of the technicalities surrounding the aforementioned German CPI print applied pressure. Lower crude oil prices, continued recessionary worry (increased focus on the chances of Fed easing in ’23) and quarter-end rebalancing flows were the touted as supportive factors on the day, with the space richening in NY dealing.
• That allowed TYU2 to register fresh session highs just ahead of the close, while the major cash Tsy benchmarks were 6-9bp richer on the day, with the belly leading the bid and the long end lagging a little.
• Official PMI data out of China provides the headline risk event in Asia-Pac hours, with modest rates of expansion seen for both the manufacturing and non-manufacturing readings after last month’s contractions. Thursday’s NY session brings the latest round of monthly PCE data, the MNI Chicago PMI print and weekly jobless claims readings.