Powell & Month-End Induce Notable Rally

TYH3 looks through its late NY peak at the-open before easing back at the margin to trade +0-18+ at 114-02+.

• Tsys shunted higher in the aftermath of Fed Chair Powell’s address, with a couple of notable waves of buying linked to larger than average month-end index extensions helping the move extend further into the bell on Wednesday. That left the major cash Tsy benchmarks 7-19bp richer at the close, with the belly leading.
• Powell dropped the language surrounding “a ways to go” in his latest address (using “we have more ground to cover” and “there is considerable uncertainty about what rate will be sufficient, although there is no doubt that we have made substantial progress”), while there was nothing in the way of overt pushback re: the pull back in the tightening of financial conditions witnessed since mid-October, facilitating the dovish reaction in markets. Elsewhere, Powell reaffirmed the idea that a slowdown in tightening was coming, perhaps as soon as the Dec meeting, while he continued to pushback against the idea of anything like rate cuts in the foreseeable future.
• Tsys had cheapened pre-Powell, despite softer than expected ADP employment data.
• In terms of block flow, buying across TU, FV & TY stood out late in the day, while an FV/US flattener block was also noted as the curve steepened into the bell.
• Short positioning may have given the rally further legs.
• Chinese Caixin manufacturing PMI data headlines the Asia-Pac docket. Further out, NY hours will be headlined by the PCE data suite, ISM manufacturing survey and Fedspeak from Bowman, Barr & Logan.