Flat Re-Open After Two-Way Thursday

A flat open for TYU2 after the contract closed around the middle of its Thursday range, last dealing -0-02+ at 118-13+.

• Thursday was a non-linear day for the space, with an initial bid in early NY trade more than reversed as headline PPI data topped expectations (although core missed). The resultant flattening was then limited by comments from Fed hawks Waller (permanent voter) & Bullard (’22 voter), who both flagged their preference for a 75bp rate hike at this stage, allowing some of the CPI-inspired Fed tightening premium to be unwound (OIS now prices ~82bp of tightening for the July FOMC, back from the 93bp that was observed earlier on Thursday), as Tsys found a base. Italian political unrest also played into wider core global FI moves at various stages in the day.
• That left the major benchmarks Tsys 2bp richer to 4bp cheaper on the session, with the belly of the curve leading the weakness, while the wings richened.
• China’s GDP data and monthly economic activity readings provide the highlights of Friday’s Asia-Pac docket, with the latest round of MLF operations from the PBoC also set to generate interest. Further ahead, retail sales data and the inflation expectations component of the latest UoM sentiment survey will headline during NY hours (after Waller and Mester flagged those releases as potential trigger points for a larger rate hike later this month). Fedspeak from Bullard (’22 voter), Bostic (’24 voter) & Daly (’24 voter) is also scheduled, with the potential for impromptu Fedspeak apparent ahead of the pre-FOMC blackout period, which gets underway on Saturday.