Curve Bull Flattens, CPI In Focus

TYH3 deals at 114-15+, +0-01+, little changed from levels seen late in the NY session, with no meaningful reaction to the latest round of BoJ speculation in the Japanese press.

• Cash Tsys bull flattened on Wednesday, finishing 3-8bp richer across the major benchmarks, just shy of best levels.
• Tsys firmed as a bid in EGBs spilled over, with cautious comments from an ECB hawk re: QT and a dovish MNI ECB sources piece providing a bid.
• Pre-CPI setup ahead of Thursday's release was also touted as a factor.
• Carry over corporate debt issuance and pre-auction block sellers in futures helped cap rallies early in the NY session.
• Fedspeak from Boston President Collins saw her note that she is leaning towards a 25bp hike at the February meeting, then provided another supportive factor.
• Tsys then extended higher after the latest 10-Year auction, stopping through by 0.5 bp, meanwhile a strong cover ratio and above average indirect take up was observed as primary dealer take up fell.
• A block buy in TU futures (+13k) after the bell also aided the bid later in the day
• CPI and PPI data from China headlines the Asia-Pac docket. Further out US CPI provides the highlight (our preview is here), we also have weekly initial jobless claims. There is Fedspeak from Philadelphia Fed President Harker, St Louis Fed President Bullard and Richmond Fed President Barkin. On the supply side we have the latest 30-year auction.