Tsy Yields Fall to Mid-Dec Levels

Tsy yields fell back to mid-December levels Wednesday (30YY 3.5185% low), futures back near first half highs after the bell.

• Initial support overnight, Tsys gap bid on BoJ policy annc: monetary policy settings steady, yield curve control unchanged.
  
• Tsys surged higher following weak Retail Sales (-1.0%, ex-motor -0.6%) and weaker PPI (-0.5%, ex food/energy +0.13%) - lowest since Nov'20.
• Short end well bid as markets price in policy pivot. Fed funds implied hike for Feb'23 -.7 to 27.2bp, Mar'23 cumulative 45.6bp (-1.8) to 4.788%, May'23 54.5bp (-2.8) to 4.876%, terminal at slips to 4.875% in Jun'23 from 4.905% earlier.
• From Philly Fed Harker: “Hikes of 25 basis points will be appropriate going forward,” he said in prepared remarks. “I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed.”
• Tsy futures bid accelerates after strong $12B 20Y bond auction re-open (912810TM0) trades through: 3.678% high yield vs. 3.702% WI; 2.83x bid-to-cover vs. prior month's 2.68x.