COORECTS: High ISM Prices Paid Helps Push 2YY Over 4.9%

Tsys near session lows following volatile first half. Bonds discounted a rally that followed balanced BOE Gov Bailey policy comments overnight, contrasting with more hawkish central bank stances. Tsy sell-off accelerated after midmorning ISM data, particularly jump in prices paid to 51.3 from 44.5 prior (46.5 est).

• Modest react to MN Fed Kashkari stating "overtightening policy definitely a risk", but stressed undertightening to combat inflation is worse than overtightening. Kashkari leaning toward raisng terminal dot to 5.4%.
• Federal Reserve Bank of Atlanta President Raphael Bostic said Wednesday he sees the need for more rate increases amid high inflation and then likely holding them steady well into next year. "I think we will need to raise the federal funds rate to between 5 and 5.25% and leave it there until well into 2024," he said in prepared remarks.
• Yield curves bear steepened as 2s drew technical buying after TUM3 hit 101-20.62 low (101-22.38 last), 2YY hit 4.9014% -- highest since May 2007.
• STIR: Fed funds implied hikes off earlier highs: Mar'23 30.5bp vs. 31.9bp high, May'23 cumulative 57.6bp vs. 58.5bp (+2.4) to 5.154%, Jun'23 76.9bp (+2.4) to 5.347%, terminal at 5.465% in Oct'23 vs. 5.50% earlier high.