Off Best Levels, Light Bull Steepening Seen

Cues from EGBs and gilts (initially driven by supply burden and stronger-than-expected German factory orders data) saw Tsys back from Asia-Pac highs, before the recently released ECB inflation expectations survey helped limit the pullback.

• That leaves TYH4 +0-05 at 110-30, around the middle of its 0-09 range.
• Volume in the contract sits at a healthy ~236K, albeit comfortably shy (~50%) of levels seen at this juncture on Monday.
• Cash Tsy yields are 0.5-3.0bp lower across the curve, with some bull steepening observed.
• FOMC-dated OIS shows ~4.5bp of cuts through the March meeting, little changed vs. levels seen at this time yesterday. Meanwhile, ~118bp of cuts are currently priced for ’24, back from Monday’s extreme of ~113bp of cuts over that horizon.
• Looking ahead, Fedspeak from Mester, Collins & Kashkari will be seen in NY hours, while 3-Year Tsy supply will provide a litmus test for demand after the recent run higher in Tsy yields.