Cheaper On Wednesday

TYU2 operates around late NY levels, unchanged at 117-08, a touch above Wednesday’s base.

• Cash Tsys finished Wednesday 5-6bp cheaper across the curve.
• Firmer prints for underlying durable goods data (alongside a miss for the headline print) and firmer than expected capital goods readings, along with largely positive revisions, helped apply some pressure during the NY morning. M/M pending home sales data wasn’t as weak as exp.
• 5-Year Tsy supply also added to the weakness, tailing by 1bp, with the cover ratio softening below the recent average alongside an uptick in dealer takedown, to above average levels.
• Continued inflation-based fears in the UK Gilt space also aided the cheapening.
• In the background, continued setup for the upcoming Jackson Hole symposium would have also factored into price action, with the Fed’s hawkish musings setting the tone in recent weeks. We have suggested that a dovish Powell pivot on Friday is unlikely (see our full preview of that event here: https://marketnews.com/mni-jackson-hole-preview-xxx )
• The latest BoK monetary policy decision headlines the Asia-Pac docket, with a 25bp rate hike widely expected.
• Further out, Thursday’s NY docket includes weekly jobless claims data, the second Q2 GDP print and the release of the Kansas City Fed manufacturing index. 7-Year Tsy supply is also due).