TYH2 Off Late NY Lows, Cash Tsy Trade Closed Until London Hours

TYH2 off late NY lows in early Asia dealing, last trading +0-00+ at 125-26.

• Tsys ultimately fell afoul of a modest upside surprise in U.S. CPI data and hawkish commentary from ’22 FOMC voter Bullard, who told BBG that he is now calling for a cumulative 100bp of rate hikes by the end of June, while he noted that he is undecided re: the need for a 50bp hike in March (deferring to Chair Powell on the matter). While he also expressed the potential to the potential for an inter-meeting rate increase.
• Benchmark Tsys bear flattened, cheapening by 7-22bp come the bell. 2s saw the biggest daily yield move since ’09, while 10s punched through and closed above 2.00% for the first time since ’19. The latter seemingly resulted in convexity-hedging like flows.
• Feb Fed Funds futures are now pricing in a chance of an intermeeting hike (see earlier bullet), while the OIS strip is now effectively fulling pricing in a 50bp hike come the end of the Fed’s March meeting (~49bp priced at last mark).
• There isn’t much in the way of meaningful macro risk slated for Asia-Pac hours on Friday, while the holiday-induced closure of Japanese markets means that cash Tsys will be closed until London hours. UoM Sentiment data and an address from Fed’s Barkin (’24 voter) headline the NY docket on Friday.