Cheaper Bias Persists

(MNI Australia) TYH3 deals at 112-07 in line with levels seen late in the NY session.

• Cash tsys were 1 to 4 bps cheaper at the bell on Wednesday, with the 7s to 30s leading the cheapening. The 2s10s dealt at its least inverted level since mid November, finishing dealing at -46.5 bps.
• Tsys were pressured even as risk aversion took hold in the cross asset space. Italian authorities said they would begin Covid testing on all flights from China, and the US is also increasing testing requirements for Chinese arrivals.
• Weakness also continued after mixed data prints. Pending home sales were weaker than expected (-4.0%, -1.0% forecast) whilst the Richmond Fed Index was much stronger than expected (+1, -10 forecast).
• The latest 5-Year auction sparked further marginal pressure on tsys, generating a tail of ~1bp, despite the cover ratio rising to 2.46 vs 2.39 at the previous auction.
• Fed dated OIS is pricing ~32bp of tightening for the Feb ’23 meeting, remaining stable. Terminal rate pricing rose ~7bps yesterday to 5.02%.
• In Asia-Pac today we have a thin data calendar. Further out US Initial Jobless Claims is the main point of interest ahead of a 7Y auction.