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(Correction) Shortened-Session Wrap Up

(Correcting TYU2 level, which should say 119-21 and not 120-00 originally shown)
  • Today’s shortened-session has been driven by both global and domestic factors, with implied yields boosted early on by an easing of China Covid restrictions (the latest being Shanghai lifting access restrictions for residential compounds and restarting basic operations for public transport) along with a sizeable beat in German CPI inflation (EU-harm. CPI +1.1% M/M vs +0.5 exp).
  • The Fed’s Governor Waller (voter) then gave a further helping hand, noting support for 50bp hikes at ‘several’ meetings in an escalation from widespread FOMC support for such moves at the next ‘couple’ meetings. This is part of his desire to hike above neutral by the end of the year, being prepared to do more ‘if the data suggest that inflation is stubbornly high’.
  • Eurodollars close as much as 10 ticks lower across the curve, led by late whites/front reds as hike expectations firm. EDZ2 is close to where it has after the May FOMC but with the main difference being a trimming in hike expectations thereafter, now levelling off close to 3.25% in EDH3-EDM3 compared to previous peaks above 3.5%.
  • TYU2 closes 15+ ticks lower at 119-21 as it fades off recent highs. The primary trend remains down, with support next eyed at 119-03 (May 23 low).

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