TY Tests Key Support

Spill over surrounding UK CPI data provides the early cheapening bias in Tsys.

• That leaves cash Tsys running 0.5bp richer to 3.5bp cheaper, twist steepening.
• TYZ3 tests key support at yesterday’s/early September low (106-03+).
• Heightened geopolitical angst was noted in Asia-Pac hours, after a missile hit a hospital in Gaza, triggering a cancellation of President Biden’s meeting with several Arab leaders.
• Crude oil is firmer as a result, as is gold, but there hasn’t been a lasting safe haven bid in Tsys, given the recent direction of travel in the space and heightened worry re: oil-induced inflation.
• Asia-Pac flow saw a couple of FV block buys (summing to +5K), as well as an apparent FV/US steepener block that seemed to represent a partial unwind of an existing flattener position.
• Terminal policy rate pricing on the FOMC-dated OIS strip point to a terminal policy rate that is 14.5bp above prevailing levels (through January), before ~48bp of cuts are priced through September ’24. We are off yesterday’s post-data extremes.
• Looking ahead, another raft of Fedspeak is due, as is housing starts and building permits data.
• Participants also eye President Biden’s visit to Israel.