Flat Restart After Aggressive Twist Flattening

A flat reopen for TYZ1, last dealing -0-06 at 130-31+ after the contract pulled away from best levels into the NY close.

• Aggressive twist flattening of the curve was witnessed overnight, with more than a sprinkling of global spill over influencing the front end in the wake of much firmer than expected underlying Australian CPI data and the latest BoC monetary policy decision.
• Meanwhile, the long end drew support from the UK DMO's choice to implement a larger than expected cut to Gilt issuance during the remainder of the current FY.
• The latest round of 5-Year Tsy supply stopped through WI by 2.5bp, with the cover ratio ticking higher, moving above its recent averages, while the dealer takedown was one of the lower instances on record. The auction helped the 5-/30-Year yield spread off of the flattest level witnessed since Mar '20.
• 2s and 3s were cheaper on the day (2-Year yields rose ~3.5bp on the day), while 30s led the long end richening, as yields there fell by ~9bp on the day.
• NY flow of note included a TU/FV steepener (+15,795/-7,580) in the early afternoon, while an FV/WN flattener was seen towards the close (-5,340/+2,000). A block seller of UXY (-5,358) was also seen during the NY afternoon.
• RBA YCT matters will garner most of the attention during Asia-Pac hours (see earlier bullets for more details on that front), while 7-Year Tsy supply, Q3 GDP and weekly jobless claims data are all due during NY dealing.