Light Twist Steepening, With China Matters Dominating Pre-NFP

Tsys remain underpinned into London as Chinese & Hong Kong equities rally and the broader USD weakens.

• China re-opening speculation, signs of the potential for deepening of Sino-German economic ties and BBG source reports noting that “U.S. audit officials completed their first on-site inspection round of Chinese companies ahead of schedule” have all factored into price action.
• This came after weakness in the longer end of the Japanese curve and a bid for short dated Aussie bonds provided a light twist steepening impulse early in Asia trade.
• Cash Tsys run 2bp richer to 1bp cheaper across the curve, pivoting around 20s, with the 2-/10-Year spread hovering above the deepest levels of inversion registered during the current cycle (printed on Thursday). TYZ2 deals -0-00+ at 110-00+, a little off the peak of its 0-09 range on solid enough volume of ~95K.
• Flow was headlined by a couple of TY block sales (-1.4K & -1.9K), although these had no tangible impact on broader price action.
• Friday’s NY docket is headlined by the latest labour market report (see our full preview of that event here), meanwhile, post-FOMC blackout Fedspeak gets underway with addresses from Collins & Barkin.