Off Best Levels As Equities Recover From Lows, Still Richer On The Day

Tsys consolidate off their early European peaks after feedthrough from the softer than expected Chinese economic data and a weaker round of overnight trade for e-minis provided support through early London hours. The early richening then moderated from extremes after wider equity markets caught a bid, with equity traders perhaps viewing the Chinese data via a bad news is good news prism, in that it could promote deeper Chinese policy easing.

• That leaves the major cash Tsy benchmarks running ~3bp richer across the cruve, while TY futures operate just above the middle of their 0-12 range.
• Flow has been headlined by a 10K lift of the TYN3 118.00 calls.
• FOMC-dated OIS shows just over 70bp of easing by year-end vs. current terminal rate pricing after yesterday’s mix of hawkish commentary from Kashkari (’23 voter) against more guarded musings from Goolsbee (’23 voter) and Bostic (’24 voter).
• Retail sales data headlines the data docket in NY hours, with another raft of Fedspeak incoming.
• Debt ceiling rhetoric is also eyed ahead of today’s Biden-Congressional leadership meeting, particularly after Monday saw House Speaker McCarthy pour some cold water on the weekend optimism surrounding the matter.