Two-Way Wednesday

TYU2 trades marginally below late NY levels at the re-open, +0-06+ at 120-09+, after running back towards Wednesday’s Asia-Pac high into the close.

• A two-way day for the wider Tsy curve saw the major benchmarks finish 1.5bp cheaper to 6.0bp richer on Wednesday, as the curve twist flattened, pivoting around the 3-Year point. Equities were comfortably higher on the day, although the turnaround and subsequent sell off in crude oil futures likely supported Tsys during the second half of NY dealing.
• Fedspeak continued to highlight the fight against inflation and seemingly push back against the idea of an impending pivot (note that ’24 voter Daly flagged her preference for a 50bp increase at the September FOMC), aiding the weakness in the front end. Stronger than expected factory orders data and a firmer than expected ISM services survey pressured the space during the NY morning, although there was a swift turnaround as we worked through NY dealing, as 10+-Year paper went out at/near late session richest levels.
• The latest quarterly Tsy refunding announcement saw outsized cuts to 20-Year issuance (in line with wider expectations, although some looked for a larger cut), while cuts to shorter dated issues (2s and 3s) caught some by surprise.
• 2s/10s tapped a fresh cycle low on the day, finishing just off flattest levels of the session.
• There isn’t much in the way of tier 1 economic releases slated for Asia-Pac hours. Further ahead, the latest BoE monetary policy decision will provide interest during the London-NY crossover, with Challenger job cuts and weekly jobless claims data set to headline the economic releases during the NY session. We will also hear from Cleveland Fed President Mester (’22 voter).