A modest cheapening bias was observed in Asia hours, aided by the previously outlined post-auction weakness and steepening on the JGB curve. The move in Tsys has been much more limited, with cash benchmarks running 2bp cheaper across the curve. TYZ2 operates in a fairly limited 0-08 range, last -0-05+ at 114-25+, just off lows on subdued volume of ~40K.
- One market contact noted some regional real-money account interest in selling 30s.
- Regional risk events failed to provide a tangible catalyst for the space.
- Thursday’s U.S. docket sees the release of retail sales, Empire & Philly Fed surveys, industrial production, weekly jobless claims and terms of trade data.
- Focus is squarely on the 75/100bp hike debate re: next week’s FOMC (J.P.Morgan played down the odds of a 100bp move on Wednesday after Nomura called for such a hike post-CPI). ~83bp of tightening is currently priced for next week’s meeting.
- A block sale of SFRU3 (-3.5K) and block flattener in SFRH3/H4 (-9K) headlined on the flow side in Asia.
- The Shanghai Cooperation Organisation gathering gets underway on Thursday, with Chinese President Xi set to meet with Russian President Putin in the afternoon (Uzbekistan time). The Kremlin has already noted that the summit will provide an "alternative" to the Western world.