Curve Flattens, Powell Says No Pre-Set Path

TYM3 deals at 110-26+, -0-03, in line with late NY levels.

• Cash Tsys finished 1-6bps cheaper on Wednesday as the curve flattened. 2s10s inversion printed a fresh cycle extreme before moderating a touch.
• Tsys firmed through the European session, with no overt headline driver. Participants perhaps used Tuesday's weakness and a move lower in Asia as an opportunity to close shorts. 10s once again failed to establish themselves above 4.00%.
• Fed Chair Powell noted that no decision had been made on the pace of rate hikes and that the Fed is not on a pre-set path. Powell said that Friday's NFP and CPI/PPI metrics next week are going to be important as the Fed assesses their next steps.
• Spillover from north of the border as Canadian FI rallied post-BOC aided Tsys at the margin.
• Pre-10-Year auction selling saw Tsys pare gains, with pressure continuing as the auction tailed. A weak bid/cover ratio and indirect take-up were observed.
• Fed's Beige Book summary noted that Labor market conditions remain solid, and that wages increased at a moderate pace.
• CPI and PPI data from China headline in Asia-Pac. Further out we have Challenger Job Cuts and Initial Jobless Claims, elsewhere, comments from Fed VC Barr will cross. We also have the latest 30-Year Supply.