Bund Weakness Unwinds Early Richening

Initial Asia-Pac trade saw regional participants lift Tsys as they looked towards the prospect of a slower round of data-dependent Fed hikes post-FOMC. That was before a pre-NRW CPI dip in German Bund futures pulled the space away from best levels (with the data release itself promoting some short-term vol. in Bunds). TYU2 printed a fresh session low on the back of that data release, and now operates -0-01 off the base of its 0-10+ range, -0-14+ at 119-31, with volume running at a fairly non-descript ~85K. Cash Tsys are marginally mixed across the curve, last dealing -/+0.5bp vs. Wednesday’s closing levels.

• Macro headline flow remains light and the move in Tsys is quite muted when you consider that USD/JPY has shed over 100 pips as Tokyo FX dealers react to the potential for a slower, data-driven round of hikes from the Federal Reserve, with that particular move perhaps being exacerbated by short JPY positioning.
• Looking ahead, German CPI data (on the regional and national levels) will generate interest. Meanwhile, the initial Q2 GDP reading provides the highlight of Thursday’s NY docket (with median estimates looking for the U.S. to escape a technical recession). Weekly jobless claims data and the Kansas City Fed m’fing activity reading are also due, as is 7-Year Tsy supply.
• Participants will also be on the lookout for comments surrounding the latest phone call between U.S. President Biden & Chinese counterpart Xi.