Real Yields Climb Vs. Nominals

Rates trading near top end of the range after the bell, whippy first half trade gave way to better buying in the long end into midday - bonds trading sideways through the second half, USU2 +1-21 at 136-26. Despite the drop in nominal US yields, real yields sit at 69bps, up more than 10bps since early Monday levels and the highest since Mar-2019. Yield curves mixed after the bell, 2s10s -1.605 at 4.183, well off early 7.177 early high, 5s30s +1.365 at 5.776.

• Early domestic and foreign data in play. Rates gapped higher overnight following much weaker than expected German CPI for North Rhine (0.1% MoM; EST 0.9%; 7.5% YoY; EST 8.1%), blipped higher after prelim German CPI gained less than anticipated (+0.1% MoM vs. +0.4%).
• Tsys resumed march higher after Q1 GDP declines slightly more than expected (-1.6% vs. -1.5% est).
• Fed Chair Powell at ECB forum in Sintra: Hard to hike rates "without a hit to growth" or boosting unemployment. “There’s no guarantee that we can do that,” Powell said. “It’s something that’s going to be quite challenging.” The Fed raised rates by 75 basis points this month and has signaled substantial further increases to come.
• Cross asset: US$ extended on Tuesday’s bounce and the USD index has comfortably breached last week’s highs, rising a half a percent on the day.
• Crude oil prices are ending a three-session rally by sliding circa 2% despite US crude inventories falling by more than expected in EIA data, as growth concerns mount with Treasuries rallying solidly.