Talking Technicalities

TYU2 sits a touch below late NY levels, last dealing -0-01+ at 120-30, with the after-hours post-earnings rally in Apple & Amazon equities the main driver (NASDAQ futures +1.2% last, S&P 500 +0.6%).

• Bull steepening was the order of the day on Thursday, with softer than expected advanced Q2 GDP data indicating a technical recession (albeit with the White House continuing to push back against that idea, as they flag the strong labour market narrative to counter). That left cash Tsys 4-15bp richer across the curve come the bell, a little shy of their early NY bullish extremes., extending on Wednesday’s post-FOMC rally.
• FOMC dated OIS still more than fully price a 50bp hike at the September Fed meeting (BBG WIRP points to ~56bp of tightening being priced at present, ~5bp or so less than was priced before Wednesday’s FOMC), with a cumulative 93bp of tightening priced through the Fed’s December decision (~15bp below pre-July FOMC levels).
• Elsewhere, there was little to note come the end of the latest Biden-Xi phone call, with subsequent source reports flagging discussions surrounding a potential face-to-face meeting between the two leaders (an idea that was already doing the rounds ahead of the meeting).
• 7-Year Tsy supply helped underpin Tsys later in the day, pricing 0.5bp through WI, with dealer takedown sliding below its recent average as the cover ratio ticked further above its own recent average.
• The lower rate environment, coupled with no hiccups in the Biden-Xi call, allowed equity market participants to look through any worry surrounding the GDP reading, firming on the day, before the aforementioned extension in futures after the bell.
• There isn’t much in the way of tier 1 macro data to highlight during Asia-Pac hours. Further ahead, PCE data, the latest MNI Chicago PMI print and final UoM sentiment data (with an eye on 5- to 10-Year inflation expectations after their pullback in the flash reading) provide the highlights of the NY docket. There isn’t any Fedspeak on the slate, but we would expect some impromptu post-blackout appearances on the usual TV channels.