Richer, Little Reaction To Chair Powell’s Testimony, Light Calendar

ACGBs are richer (YM +2.0 & XM +4.5) after US tsys finished with a twist flattening of the curve. US tsy yields moved higher after higher-than-expected UK inflation data but recovered following a solid 20-year bond auction. Meanwhile, short-term tsys remained cheaper on the day, with the 2s10s spread testing a downside inversion of 100bp late in the session.

• The broader reaction in the Treasury market to Fed Chair Powell's comments during his testimony before the House Financial Services Committee was relatively subdued, as he reiterated expectations of higher rates to address inflationary pressures.
• 3yr futures have traded to a fresh cycle low of 95.980 this week. The contract recently cleared the February lows on the continuation contract, and attention is on key support at 95.960, the Jun 17 2022 low (cont). According to MNI’s technicals team, clearance of this level would confirm a critical bearish medium-term development and signal scope for an extension towards 95.451, a Fibonacci projection.
• Cash ACGBs opened 3-4bp richer with the AU-US 10-year yield differential at +22bp.
• Swap rates are 3-5bp lower with the 3s10s curve flatter.
• The bills strip twist flattens with pricing -1 to +3.
• RBA dated OIS pricing opened little changed.
• The local calendar is light today.