Hope Surrounding The Chinese COVID Situation Applies Light Pressure

TY futures deal a little off the base of their overnight range, while cash Tsys run 2-3bp cheaper as the curve bear flattens.

• Optimism surrounding the Chinese COVID situation biased Tsys lower in Tuesday’s Asia-Pac session, with a modest downtick in the number of new daily COVID cases in the country and speculation surrounding an impending press conference which will be held by the Chinese health authorities applying pressure.
• As we have noted elsewhere, speculation surrounding the potential for a complete re-opening of China seems a bit misplaced to us, although there may be further tweaks to China’s ZCS announced at the press conference.
• Richmond Fed President Barkin seemingly OK’d a slowdown to 50bp rate hike increments, although pointed to a longer hiking cycle with a potentially higher end point vs. previous expectations, as he stressed that the central bank will do what it needs to do, echoing the central Fed message.
• A block buy in TY futures (+1.3K) helped the space find a bit of a base after the China induced sell off.
• Looking ahead German state and national inflation data will provide interest in London hours, as will the aforementioned Chinese press conference re: COVID. Further out, NY hours will see the release of some of the house price metrics and Conference Board consumer confidence data.