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Tight In Asia After Wednesday's Twist Steepening

US TSYS

The Asia-Pac session lacked meaningful inputs, which allowed the core global bond markets to operate in narrow ranges on light volume

  • T-Notes stuck to a 0-03 range, last -0-02+ at 131-24, with cash Tsys running little changed to 1.0bp richer across the curve. A quick look at the latest round of Japanese BoP data revealed that Japanese investors shed a net Y563.4bn of U.S. Tsys in the month of February, representing the first round of monthly net sales witnessed since August.
  • As a reminder, the cash Tsy curve twist steepened on Wednesday, pivoting around the 5- to 7-Year sector, with Tsys out to 5-Years richening by ~0.5bp, while 30s cheapened by ~4.0bp on the day. Broader Fedspeak offered little new on net, with the minutes from the latest FOMC meeting consistent with Fed Chair Powell's messaging. In terms of the short end, the minutes noted that "the Federal Reserve could consider adjusting its administered rates if undue downward pressure on overnight rates emerged. Responses to the Desk surveys indicated that many market participants anticipated adjustments to the interest on excess reserves rate and the ON RRP rate at or before the June meeting." This triggered selling of FFK1 (both outright and vs. FFJ1), but it was an earlier round of 20K lots of block buying of the Eurodollar red pack that headlined on the flow side during NY hours, providing some support to the shorter end of the Tsy curve in the process. Elsewhere, Tsy Secretary Yellen released a proposal to raise ~$2.5tn in tax revenues over a 15-Year period.
  • Weekly jobless claims data, Fedspeak from Powell, Kashkari & Bullard and the mid-month auction announcement headline locally on Thursday.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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