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The space has firmed after T-Notes had a brief and shallow look through Tuesday's low, with that particular contract now +0-04 on the day, printing 133-03+, a touch shy of best levels. The major cash Tsy benchmarks run unch. to 2.0bp richer across the curve. There was little in the way of overt headline flow to trigger the shunt higher. More recently, headlines have crossed the wires noting that Democrats on the Senate Budget Committee have reached an agreement on a $3.5tn fiscal plan, which aims to advance President Biden's Jobs & families initiative without support from the GOP. Overnight flow was dominated by the TYU1 133/132 1x2 put spread which saw over ~20K lifted on screen.

• To recap, yields were biased higher during NY hours on Tuesday, firstly as a result of firmer than expected CPI data for the month of June, as the headline Y/Y reading hit the highest level witnessed since '08 (although some of that was unwound as the "transitory" argument remained in play, even as the core print topped exp., hitting multi-decade highs), with a fresh leg higher then seen after the 30-Year Tsy auction. The latter saw the space unwind the twist flattening that was in play after the aforementioned CPI prints. Yields 3-Years to further out the curve finished 4.0-5.0bp higher on the day as a result. In terms of auction specifics, the latest round of 30-Year Tsy supply saw a 2.4bp tail, as the cover ratio slid further below its recent average. Meanwhile, dealer participation jumped above its own recent average. An MNI interview with Dallas Fed President Kaplan ('23 voter) saw him note that he has raised his inflation forecast for the remainder of the year and into 2022 on a significant widening of price pressures, and urged more debate on pulling back asset purchases. Highlights on the flow side included ~17K of the TYU1 132.50/134.50 strangle being sold in total on screen and via block. There were also 2x 5.0K block buys of FVU1 futures bookending NY hours.
• Focus during NY hours will switch to Fed Chair Powell's semi-annual testimony on the Hill. Elsewhere, PPI data, an address from Fed's Kashkari and the release of the Fed's latest beige book will be eyed.