Twisting Flatter On Tuesday

A flat re-open for TYU2, which deals around late NY levels, last +0-00+ at 119-13.

• The cash Tsy curve twist flattened on Tuesday, with benchmark Tsys running 10bp cheaper to 1bp richer come the bell, pivoting around the 20-Year zone. Longer dated paper was more willing to retrace losses observed in the NY morning, after weakness was triggered by stronger than expected industrial production data (albeit with softer than expected housing starts data observed, an outcome that was partially aided by positive revisions) and perhaps some influence from north of the border on firmer than expected Canadian core CPI readings. Spill over from the Gilt market may have also provided some flattening impetus after the latest round of UK labour market data resulted in an uptick in BoE rate hike premium.
• IG issuance also helped activity, although volumes were still sub-par on the day.
• The latest RBNZ monetary policy decision provides the headline risk event during Asia-Pac hours. Note that a 50bp rate hike is seen as a foregone conclusion, so focus should quickly shift to the language deployed by the Bank, in addition to its updated OCR track projections. UK CPI data will then provide some interest during London hours, as will Eurozone GDP. Further out, Wednesday’s NY docket consists of the minutes from the most recent FOMC meeting, retail sales data, weekly MBA mortgage apps. 20-Year Tsy supply and Fedspeak from Governor Bowman (although the topics of the discussion may limit the room for comments on monetary policy).