Off Best Levels As Early Bid Fades

Cash Tsys run flat to 1bp richer into London hours, with TYZ2 +0-01 at 111-01+ operating around the middle of its 0-14 Asia range, on volume of ~95K.

• Tsys have moved away from best levels after leaning on the latest headlines surrounding the potential for another fiscal U-turn in the UK for support during the first half of the overnight session.
• ECB source reports from both BBG & RTRS flagged an apparent ease amongst hawks re: organic balance sheet run off getting underway at some point in H123, with their focus being on interest rates when it comes to the main monetary policy tool.
• Headline flow was relatively limited elsewhere, with the PBoC Governor reaffirming the Bank’s well-known support for the continued deployment of prudent monetary policy, Meanwhile, Chinese CPI & PPI data provided very modest downside surprises.
• Block sales were seen in FV (-2.0K) & TY (-2.9K) futures, with mixed blocked flow in TYX2 109.50 puts (+5K) and TYZ2 110.50 puts (-5K).
• Looking ahead, Gilt market gyrations will be eyed, with the BoE’s temporary purchases set to conclude today and continued fiscal/political rumours doing the rounds in London.
• Friday’s NY docket includes retail sales and the UoM sentiment survey (watch the inflation components in the latter). We will also get Fedspeak from Waller, Cook & George ahead of the weekend.