Bull Flattening, Early Asia Richening Holds

TYH3 deals at 114-07, +0-07, a touch off the top of its 0-08+ range on volume of ~71K.

• Cash Tsys have bull flattened, dealing 2-4bp firmer across the major benchmarks.
• Tsys firmed in early trade as Asia-Pac participants seemingly paid more attention to the well-received 3-Year Tsy auction results and lack of fresh monetary policy steer from Fed Chair Powell, fading Tuesdays issuance-driven cheapening.
• Potential for easing of PBoCs monetary policy in H1 2023, via RRR and LPR cuts, in a bid to ensure “reasonably abundant liquidity” and lower financing costs for the real economy and property sector (via analysts commenting in a major state-run media outlet), may also have aided the bid at the margin.
• Tsys saw some brief pressure as weakness in Australian FI after stronger than expected Australian CPI and Retail Sales prints spilled over into the wider space, before paring losses.
• The richening marginally extended late in the session as the USD unwound its modest gains to trade softer.
• We have a thin docket in Europe today, further out MBA Mortgage Applications provides the only domestic data point of note. Participants will have one eye on the Dec CPI print tomorrow (see our full preview of the CPI release here). On the supply side we have the latest 10-Year auction.