Early Strength Gives Way During NY Hours

TYZ2 deals around late NY levels, +0-01+ at 110-24, looking through the firmer than expected NZ CPI data.

• Tsys initially firmed on Monday, aided by the well-documented UK fiscal U-turn and the related, sizeable rally in Gilts, before fading off best levels in NY hours, with no headline driver apparent. This left the major cash Tsys 6bp richer to 3bp cheaper come the bell, as the curve twist steepened, pivoting around 20s.
• The move away from best levels of the day gained further traction after the London market close, with block sales in FV (-5.5K) & US (-3.0K) futures helping.
• Some desks flagged continued liquidity issues as at least a bit-part player in the move away from best levels, with price-insensitive players stepping away from the space in recent months, while those that are more price elastic haven’t really shown their hand, at least not yet.
• A couple of rounds of RBA communique provide the highlight of the docket during the remainder of the Asia-Pac session, what with the release of Q3 Chinese GDP and monthly economic activity data being postponed indefinitely.
• Tuesday’s NY docket will see the release of industrial production data, as well as TIC flows and the NAHB housing market index. We will also get Fedspeak from Bostic & Kashkari.