TYM2 Ticks Away From Late Lows

TYM2 ticks away from late NY session lows at the re-open, -0-01 at 122-23 at typing. There hasn’t been anything in the way of tangible reaction to comments from Cleveland Fed President Mester (’22 voter), who flagged her desire to raise rates to 2.5% by the end of the calendar year (above the median Fed dot of 1.875%), underscoring a desire to move at 50bp clips at some meetings.

• To recap, cash Tsys ran 5-9bp cheaper on Tuesday with the 7- to 10-Year zone leading the way lower. Cash Tsys were cheaper from the Asia re-open, with the region reacting to Monday’s bear flattening & hawkish Fedspeak from Chair Powell. The move then extended in NY dealing, after the space stabilised a little during London trade. Hawkish Fedspeak from Bullard (’22 voter) aided the cheapening impulse, as he continued to beat the drum for a swifter pace of policy normalisation. San Francisco Fed President Daly (’24 voter) remained more measured when it comes to policy normalisation, given “well-anchored” inflation expectations, although still flagged the need for a “march up to neutral” rates, at a minimum. A positive day for equities and continuation of the brisk corporate issuance pace also fed into the cheapening.
• There isn’t much in the way of tier 1 risk events on the Asia-Pac docket. Looking ahead, NY hours will bring new home sales data and Fedspeak from Powell, Daly & Bullard (all of whom have spoken in recent days). Tsy supply will consist of 20-Year Tsys and 2-Year FRNs.