Richer, Looking Through Hawkish Fed Minutes

TYH3 deals at 113-10+, +0-04+, a touch below levels seen in late NY dealing.

• Cash Tsys were 2-6bp richer at the bell on Wednesday, with the belly leading the bid.
• Tsys firmed in the European session, with French CPI providing the latest softer than expected European inflation release (although French government policies may promote stickier inflation via energy prices in '23).
• ISM Manufacturing printed a touch below expectations. The prices paid component was much softer than expected, printing sub-40.
• JOLTS Job opening data pointed to a robust labor market.
• The space then saw some brief pressure before paring losses as minutes from the Feds December meeting hit the wires. Officials cautioned against an "unwarranted" loosening of financial conditions, and were also concerned that inflation will remain entrenched if the labor market stays resilient.
• Minnesota Fed President Kashkari ('23 voter) said it would be appropriate to rise rate "at least at the next few meetings", seeing a peak of 5.4%. He also noted that the Fed should only consider cutting rates when inflation is "well on its way" back down to 2%.
• Fed dated OIS is pricing ~32bp of tightening for the Feb ’23 meeting, remaining stable. Terminal rate pricing is little changed in recent trading, sitting just below 5.00%.
• Chinese Caixin services PMI data headlines the docket in Asia-Pac hours. Further out we have Eurozone PPI before US ADP employment change, week jobless claims, trade balance and services and composite PMIs. There is also Fedspeak from Philadelphia Fed President Harker and Atlanta Fed President Bostic.