CPI Keeps Asia Sidelined

TYU2 operated within the confines of a narrow 0-05 range overnight, last +0-01+ at 119-17, on sub-standard volume of ~40K, with the proximity to the impending CPI print keeping most sidelined. Cash Tsys run 1.0bp richer to 1.5bp cheaper across the curve, pivoting around 3s.

• A Chinese white paper reiterating the country’s stance on Taiwan, which also failed to take the prospect of military action against the island off the table, provided the major point of interest in Asia.
• A downtick for the Hang Seng, which trades ~2% weaker at typing, may have provided incremental support.
• A $190K DV01 block buy in TU futures (+5K) has also helped underpin the front of the curve.
• Note that we published a podcast interview with St. Louis Fed President Bullard late on Tuesday, with Bullard stressing that the Fed will be prepared to hold interest rates "higher for longer" should inflation continue to surprise to the upside, and market pricing will need to adjust accordingly. He also noted that when it comes to terminal rates “I think the destination is a little bit higher than what I would have thought even a couple months ago because inflation has continued to broaden out and doesn't look like it's turning the corner at least based on the evidence we have today.”
• When questioned on the prospect of an inter-meeting rate hike Bullard told us that Jackson Hole falls in the current inter-meeting period, "the Chair could use that if he thinks it's appropriate to signal changes in monetary policy."
• CPI data presents the focal point on Wednesday, with the German and Eurozone (final) readings due before the U.S. equivalent (see our full preview of that data release here: https://marketnews.com/mni-us-cpi-preview-buckle-up). Elsewhere, real average earnings data & 10-Year Tsy supply are due in NY hours, while Fedspeak will come from Evans & Kashkari.