Curve Twist Flattens At The Margin Overnight

Another muted round of Asia-Pac trade for U.S. Tsys saw T-Notes stick to a 0-04+ range, last +0-01 at 133-18+ with cash Tsys exhibiting some very light twist flattening, operating within -/+1.0bp of Wednesday's closing levels at typing. Flow was headlined by a 5.0K block seller of FVU1 (~$255K DV01 equivalent), which helped pressure the belly of the curve. There was a lack of meaningful macro headline flow overnight.

• T-Notes finished a little shy of best levels on Wednesday. Bull flattening of the cash Tsy curve was at the fore, with longer dated paper finishing the day ~4.0bp richer, while the shorter end of the curve was little changed. 10s and 30s registered fresh multi-month lows in yield terms in the process. Desks pointed to continued positioning washouts as a driver of the richening/flattening. Elsewhere, the move away from cycle highs in oil extended, while the minutes from the June FOMC meeting seemed to shed little fresh light on matters. Re: tapering "participants generally judged that, as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than-anticipated progress toward the Committee's goals or the emergence of risks that could impede the attainment of the Committee's goals." The general FOMC expectations reaffirmed the view of transitory upward price pressures, although upside risks were the dominant theme outside of the central scenario. Longer dated swap spreads widened in the latter rounds of dealing, with some desks citing an unwind of convexity-related receiving, which was seen earlier in the day.
• Weekly jobless claims data headlines the local docket on Thursday, although some attention will be on the publication of the ECB's heavily anticipated strategy review and the subsequent press conference surrounding the matter. The Treasury will also issue its mid-month supply announcement, for auctions next week.