Pressured After Strong ISM Prices

TYM3 deals at 111-00+, +0-00+, in line with levels seen late in the NY session.

• Cash Tsys finished 4-8bp cheaper across the major benchmarks on Wednesday, the curve flattened. 2-Year yields registered the high level since May 2007 before moderating a touch.
• Bonds were pressured after the ISM Survey, with the Prices Paid component stronger than expectations rising to 51.3 (est 46.5) from 44.5. Whilst the headline print was still in contractionary territory.
• Earlier in the session cross-market flows came to the fore. Pressure from a firmer-than-expected German CPI print was unwound on spill over from Gilts, as BoE Gov. Bailey was non committal towards future rate hikes.
• Fedspeak from Atlanta Fed President Bostic reiterated comments that rates need to rise above 5% also noting they need to be left there well into 2024. Minneapolis Fed President Kashkari stated overtightening was a risk, but undertightening to combat inflation is worse than overtightening.
• A TU/FV flattener block dominated on the flow side.
• In OIS markets terminal rate expectations rose ~6bps to 5.46%.
• In Asia-Pac data there is a thin calendar. Further out we have Eurozone CPI and unemployment, and US Initial Jobless Claims. Fedspeak from Gov Waller will also cross.