Early Cheapening More Than Reversed, Oil Weakness At The Core Ahead Of Tier 1 Event Risk

Tsys squeeze higher in the first half of the European morning, with fresh weakness in crude oil futures, which have hit a multi-week low, aiding the bid. Demand worries continue to dominate the fundamental picture re: oil, while Russian & Iranian supply matters also feed in.

• The Tsy space has more than reversed the early cheapening/bear flattening, with the major benchmarks now sitting 2.5-4bp richer as the belly builds on yesterday’s outperformance (at the margins).
• TYM3 sits 0-02 off best levels after the Apr 26 high (115-30+) capped the run higher, a breach there would expose the Apr 12 high at (116-08) as the next area of technical interest.
• Deeper pricing of FOMC rate cuts by year-end on the OIS strip (now hovering just below 70bp, which is well within the recent range) is also factoring in.
• Expect cross-market gyrations to remain at the fore before NY desks settle in for a risk-laden session, headlined by the FOMC decision.