Little Changed After Curve-wide Fresh Cycle Highs In Yield Terms

The initial spill over from Tuesday’s NY cheapening led the Tsy complex lower in early Asia-Pac dealing, with the major cash Tsy benchmarks (from 2s to 30s) tagging fresh cycle highs in yield terms and 10-Year real yields briefly turning positive for the first time since early ’20.

• The early cheapening impulse reversed as the latest round of PBoC LPR fixings came in at unchanged levels (vs. BBG median expectations for a 5bp cut to both the 1- & 5-Year fixings), with last week’s restrained PBoC easing failing to do enough when it comes to reducing bank costs to a level whereby lower fixings would have been deemed feasible.
• The resultant leg lower in Chinese equities and e-minis supported Tsys, with pockets of screen buying in TYM2 futures providing the most notable flow of Asia trade, pulling the contract/space further away from session cheaps. Note that e-minis were already lower in the wake of Netflix earnings (led by the NASDAQ 100 contract), with both the Chinese equity space and e-minis now off of worst levels as we head into London dealing (likely aided by calls from an ex-PBoC official re: easing the restrictions on property developer debt).
• TYM2 is -0-05 at 118-30+ on volume of ~190K, trading closer to the top of its 0-15 overnight range than the bottom. Meanwhile, cash Tsys are little changed on the session.
• In overnight Fedspeak, Minneapolis Fed President Kashkari (’23 voter) noted that the Fed may have to do more to tame inflation if Chinese lockdowns cause further headwinds for global trade logistics.
• Looking ahead to NY hours, existing home sales data will cross, with the release of the Fed’s beige book set to be supplemented by Fedspeak from Bostic (’24 voter), Daly (’24 voter) & Evans (’23 voter).