Two-Way Asia Session With Debate Surrounding Fed Hikes Dominating

Tsys moved away from cheaps during the second half of Asia-Pac trade after TYZ2 failed to consolidate below Tuesday’s low, despite a look through. Early Asia trade saw paper out to 5s register fresh cycle highs in yield terms.

• Cash Tsys sit 0.5-1.5bp cheaper, while TYZ2 is -0-01 at 114-29+, off lows of 114-21+, with volume running at ~117K, comfortably above the recent Asia average.
• Headline flow was dominated by Japanese authorities and the BoJ keeping JPY weakness and a rise in 10-Year JGB yields in check, with the regional reaction to Tuesday’s CPI print and related Fed repricing front and centre.
• OIS now prices 84bp of tightening for this month’s FOMC meeting, while terminal rate pricing sits around 4.30%, little changed from levels observed late yesterday.
• Nomura became the first name to call for a 100bp hike from the Fed later this month in the wake of the CPI data, with the repricing further aided by WSJ Fed whisper Timiraos writing that yesterday’s CPI print means that the Fed will hike “interest rates by at least 0.75ppt next week and raises the prospect of hefty increases continuing in coming months.”
• PPI & MBA mortgage apps data is due later today.