Off Session Lows As Curve Twist Flattens

TYH3 deals at 114-25+, +0-02+, after ticking away from the base of its 0-11 overnight range, operating on volume of ~73K.

• Cash Tsys are 3.0bp cheaper to 1.5bp richer across the major benchmarks, with the curve twist flattening, pivoting around 20s.
• Early Asia dealing saw regional participants exhibit a willingness to fade the richening observed during Fed Chair Powell’s post-FOMC meeting press conference.
• Cheapening then extended as cross-market impact from the Antipodean rates space was felt, as both ACGBs and NZGBs softened on stronger than expected local data, before Tsys then moved away from session lows through the Asian afternoon.
• The space looked through weaker than expected monthly economic data from China, with more focus on the recent alterations in China’s COVID-related reactions.
• A block seller of FV futures headlined on the flow side (-1.7K).
• Fed dated OIS price ~32bp of tightening for the Feb ’23 meeting and a terminal rate of just under 4.90%, shy of the ~5.10% seen in the Fed’s latest dot plot.
• In Europe today we have the ECB, BOE and SNB rate decisions. Further out there is a slew of U.S. data including retail sales, TIC flows, business inventories, Empire M’fing survey, initial jobless claims and industrial production.