Still On The Front Foot

Tsys remain on the front foot into London hours, with TY futures recently registering fresh session highs, while cash Tsys run 3-4bp richer on the day, with bull steepening moving to the fore after twist flattening was apparent for much of the Asia-Pac session.

• A quick reminder that the bid accelerated on the back of wires running headlines covering a Nikkei piece which pointed to a trilateral (regular) meeting between the BoJ, MoF & FSA. Part of the meeting will cover the collapse of Silicon Valley Bank. Wires have suggested the meeting will take place at 16:45 Tokyo time (07:45 London), with Japan’s chief financial diplomat Kanda set to brief the media afterwards. Earlier, Japanese Finance Minister Suzuki continued to attempt to play down any local worry re: the headwinds for global banks, while affirming the need for vigilance and flagging ongoing communication with international regulatory bodies on those matters. We aren’t sure that we will see much in the way of meaningful headline flow from Kanda, given the frequent commentary from policymakers in recent days.
• One other factor supporting Tsys as the day has worn on has been the moderation in Fed pricing on the OIS strip, with terminal rate pricing pulling back from just below 5.00%,, last printing closer to 4.90% while 80bp of cuts is now priced in by year end (vs. the terminal), which compares to ~65bp seen in early Asia-Pac trade.
• Flow has been headlined by light demand for upside exposure via FV calls.