Flat Start After A Firmer NY Session

A flat start for TYM2, with the contract operating a touch shy of Wednesday’s late NY levels, last +0-04+ at 122-24+. News that Russia-Ukraine talks will re-commence on Friday (in an online format) has had nothing in the way of meaningful impact on markets, with Ukraine flagging Russia’s suggestion that more work needs to done on a draft treaty before the leaders of the two countries can meet.

• To recap, Wednesday saw Tsys regain some poise during NY hours, with rejuvenated worry re: the Russia-Ukraine situation supporting the space, while desks also flagged month-/quarter-end rebalancing flows and receiver side swap flows as micro supportive factors for the space. This came after the European inflation impulse applied some pressure through early NY dealing. The major cash Tsy benchmarks were 3.0-6.5bp richer on the day, with 3s leading the bid. A weaker U.S. equity space also provided support.
• In terms of data, the latest ADP employment report provided a marginal beat vs. wider exp. (+455K vs. BBG median +450K, alongside a +11K positive revision to the Feb print), although there wasn’t much in the way of tangible market reaction, given the questionable short-term correlation with NFPs.
• Official Chinese PMI readings headline the docket during Asia-Pac hours, with the BBG median looking for a return to contractionary territory for the manufacturing reading, alongside a slowing of the pace of expansion when it comes to the services print. Looking ahead, the NY session will bring the release of the PCE data suite, weekly jobless claims, the monthly MNI Chicago PMI release and Challenger job cuts. We will also get comments from NY Fed President Williams, although the scope for monetary policy-related language may be limited given the fact that he will make opening remarks at a conference on the future of NYC.