Off Best Levels, But Holding Bulk Of Post-FOMC/Banking Worry Gains

Tsys have held the bulk of their FOMC/late NY bank worry-inspired gains/bull steepening, with ~80bp of cuts now priced into the OIS strip by year-end, after that particular pricing metric operated within the 65-70bp band in yesterday’s pre-FOMC trade.

• Worries re: the future of PacWest and a flash crash in crude oil futures provided support as Asia-Pac futures dealing got underway, but the bounce from lows in crude (which now sits in positive territory, with WTI over $5 off lows), as well as an assurance attempt from PacWest and regional banking peer Western Alliance re: deposit flows, have taken the edge off the early Asia-Pac bid, leaving the space a little cheaper as cash Tsy trading comes online (cash markets were closed in Asia-Pac hours, owing to a holiday in Tokyo).
• The major benchmarks sit 0.5-3.0bp cheaper, with the belly leading the cheapening.
• TYM3 has shown through its overnight base, but operates 0-03 off lows, last +0-14 at 116-11.
• The latest ECB decision presents the headline risk event today. Elsewhere, the Norges Bank decision and final services PMI readings from the major European economics provide pre-NY reference points.
• Still, European reaction to the aforementioned overnight developments will likely set the tone pre-ECB, while the NY docket consists of unit labour cost data, challenger job cuts and the weekly jobless claims readings.