Steeper & Cheaper

T-Notes unch. at 132-01, with the contract hovering just above Tuesday's late NY lows.

• A reminder that Tuesday saw bear steepening of the cash Tsy curve, with 10+-Year paper cheapening by ~5.5bp on the day come the bell. Much stronger than expected consumer confidence data (aided by stimulus cheques), with positive signs from the labour market internals of the survey, aided the momentum, with softer than expected, but steady, Richmond Fed m'fing index reading also seen. Pricing of Italy's US$ of issuance also weighed. Some desks pointed to setup ahead of the 7-Year auction as another contributory factor to the pressure. The auction stopped virtually on the screws, with a below average round of dealer takedown and steady (just above average) cover ratio, representing a solid round of supply. Late NY flow was headlined by an 11.0K block buy of FVM1 & 5.0K block buy of TYM1, while late Eurodollar trade saw screen sales of over 30K in both EDU1 & EDZ1.
• Australian CPI headlines the regional docket during Asia-Pac hours, but we shouldn't expect much in the way of meaningful movement in Tsys on the back of the release, given the RBA's guidance and likely transitory nature of any uptick in CPI, in addition to the proximity to Wednesday's FOMC decision.