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Chair Powell Limits Wednesday Sell Off

US TSYS

A narrow re-open for T-Notes operating around late NY levels, +0-02+ at 135-07+

  • The contract went out lower on Wednesday, albeit comfortably off of worst levels after Fed Chair Powell noted that it "could take more than three years to hit the 2% average inflation target," while Vice Chair Clarida and Governor Brainard underlined the broader FOMC view.
  • Some desks pointed to convexity related selling as a driving force behind the selling witnessed in early trade, although longer dated swap spreads continued the recent run of tightening, which pours some cold water on that notion. 30s traded towards 2.30%, before paring losses, although bear steepening remained the underlying theme, with 30s going out ~5.0bp cheaper on the day. 10s printed a little over 1.43% on the move, before closing back below 1.40%. The early pressure was exacerbated by block sales in U.S. Tsy futures.
  • There is nothing in the way of tier 1 headline risk slated for Asia-Pac hours.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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