No Conviction Ahead Of CPI, Options Flow Noted

TYU2 trades just above the middle of its 0-10+ Asia-Pac range heading into London hours, -0-01+ at 118-19+, on sub-par volume of 75K. Cash Tsys run -/+0.5bp across the curve, with very modest twist steepening in play.

• Tsys meandered through Asia-Pac dealing, lacking anything in the way of meaningful conviction ahead of Wednesday’s CPI report.
• An uptick in equities reversed the early carry over bid in Tsys (which spilled over from Tuesday’s light richening), before the space regained some poise to trade away from cheaps.
• There hasn’t been much in the way of wider macro headline flow to digest, with the RBNZ & BoK delivering the widely expected 50bp rate hikes, while Shanghai noted that there were no new cases of COVID discovered outside of quarantine.
• Market flow provided the focal point with 4x block buys of the FV 112.75 calls lodged throughout the session (4x +5.0K blocks), with a block buyer of TYU2 futures (+1.3K) also observed.
• The aforementioned CPI print headlines domestic matters on Wednesday (see our full preview of that release here), with 30-Year Tsy supply also due (hot on the heels of Tuesday’s poorly received 10-Year auction). The latest BoC monetary policy decision will provide some interest across the border.
• A quick reminder that a falsified “leak” of the CPI print did the rounds on social media late yesterday (indicating a headline print above +10% Y/Y), with the Labour Department subsequently acknowledging the existence of the tweet and stressing that it was a fake.