Futures Gap Higher At Open, Curve Bull Steepens As Fed Opens Door To June Pause

TYM3 deals at 116-22+, +0-25+, gapping higher at the open on Thursday as concerns over US regional banks escalate. PacWest fell as much as 60% in post market trading following reports that it is weighing strategic options including a sale.

• A reminder that cash tsys are closed until the London session due to the observance of a national holiday in Japan.
• Cash tsys finished 3-17bps richer across the major benchmarks, the curve bull steepened.
• Tsys extended higher after the FOMC delivered the expected 25bp hike as the Fed opened the door to a pause in tightening at the June meeting.
• Earlier in the session Tsys were briefly pressured as ADP Employment printed a higher than expected gain. The latest ISM Survey was mixed with New Orders component strong but Employment component ticked lower.
• FOMC dated OIS price no further hikes in 2023 with ~80bps of cuts by year end.
• There is a thin data calendar in Asia today, liquidity will be impacted by the aforementioned Japanese holiday. Further out we have the ECB monetary policy decision, a hike of 25bps is expected, US Trade Balance and Initial Jobless Claims.