Limited Pre-CPI Asia Trade

E-minis moved away from their late NY session highs, lending modest support to U.S. Tsys during Asia-Pac trade. TYH2 last -0-02 at 126-22 as a result, 0-01+ off the peak of its 0-05 Asia-Pac range and away from Wednesday’s late NY lows. Cash Tsys run 0.5-1.5bp richer across the curve. There hasn’t been much to move the broader macro needle, with the latest round of headlines surrounding China’s management of the troubled property sector failing to generate a market reaction. Participants largely remain sidelined ahead of today’s U.S. CPI print. However, it wasn’t completely quiet on the flow front, a 6K block sale of TU futures and 40K delta hedged block buy of FVJ2 117.25 puts headlined overnight.

• To recap, cash Tsys finished the session 2.5bp cheaper to 2.5bp richer on Wednesday, with the curve flattening, pivoting around 5s. 10s outperformed on the curve, aided by a strong auction, with the space richening into supply, before cheapening kicked in post-auction, with an uptick in equities and positioning squaring ahead of tomorrow’s CPI print flagged by desks. Note that several desks flagged the potential for the deployment of short cover in the 10-Year auction, which seemed to ring true. The auction stopped through by a little over 2bp, with the cover ratio pushing above the recent averages, while dealer takedown cratered into single digit territory (registering a record low for 10-Year supply). Fedspeak continued to lean against speculation of a 50bp rate hike at the end of the March FOMC, although the potential for a 50bp rate hike at some point (based on inflation data) hasn’t been completely ruled out.
• On top of CPI, wage data and 30-Year Tsy supply provide further points of interest during NY hours.