Light Twist Steepening, Chinese Equity Woes & JPY Strength Eyed

TYU2 last deals +0-04+ at 121-04, 0-01+ off the peak of its 0-10+ range, operating on volume of ~92K.

• Modest early cheapening pressure was unwound across most of the Tsy curve during the final Asia-Pac session of the week, with the impulse from the after-hours bid in e-minis (linked to Apple & Amazon earnings) fading as Hong Kong & Chinese equities pulled lower on the back of fresh regulatory worry surrounding some of the notable Chinese tech giants and a lack of immediate stimulus after yesterday’s Politburo meeting in China. A related shunt lower in USD/JPY was also noted. E-minis have held on to the bulk of their gains, with the NASDAQ 100 leading.
• That leaves the curve twist steepening, with the major cash Tsy benchmarks running 2.5bp richer to 1.0bp cheaper, pivoting around 20s.
• Overnight flow was headlined by a block buy of FV futures (+2.5K).
• Looking ahead, PCE data, the employment cost index, the latest MNI Chicago PMI print and final UoM sentiment data (with an eye on 5- to 10-Year inflation expectations after their pullback in the flash reading) provide the highlights of the NY docket. There isn’t any Fedspeak on the slate, but we would expect some impromptu post-blackout appearances on the usual TV channels.
• Elsewhere, participants will be on the lookout for any fresh colour surrounding a face-to-face meeting between U.S. President Biden and his counterpart Xi, after source reports flagging discussions pertaining to the matter did the rounds in the wake of the call that was held between the leaders on Thursday (the idea was already touted prior to the-call).