Flat Start For TYZ2; Growth Worry Sees Tsys Bull Flatten On Tuesday

TYZ2 is -0-01 at 116-04+ after the re-open, holding 0-03 below Wednesday’s peaks at writing.

• To recap, cash Tsys bull flattened on Wednesday, with the major benchmarks running 7.0-9.5bp richer across the curve heading into the close.
• The bid in Tsys was supported by a rise in growth-related worry, with an initial uptick on news of expanding Chinese lockdowns accelerated by the Fed’s Beige book forecasting weaker demand “over the next six to twelve months, with the Atlanta Fed’s GDPNow estimate for Q3 ‘22 revised from +2.6% to 1.4% (after taking into account data releases since Sep 1).
• FOMC dated OIS now price in ~69bp of tightening in Sep, continuing its drift higher, also perhaps aided by a piece on Wednesday from WSJ’s Timiraos on the Fed’s bias for a 75bp vs. 50bp hike in September, with the USD and Tsy yields ticking higher after its release.
• Looking ahead, the regional data docket will be headlined by Japanese Q2 final GDP, bank lending, BoP, and weekly international security flow figures, along with Australian trade data for July.
• The RBA’s Gov. Lowe is due to speak as well on “Inflation and the Monetary Policy Framework”, with participants eyeing the Q&A following the RBA’s policy decision on Tuesday.