US Downgraded By Fitch, Curve Bear Steepens On Tuesday

TYU3 deals at 111-04, +0-08+, a touch above late NY levels. Tsys are marginally firmer thus far on Wednesday as Fitch downgraded the US to AA+ from AAA. Fitch noted that the rating change reflected an expected fiscal deterioration over the next three years, a high and growing government debt burden and repeated debt limit standoffs.

• Cash tsys finished 2-8bps cheaper across the major benchmarks, the curve bear steepened.
• Risk off flows weighed on tsys through the European session, the USD firmed with BBDXY rising ~0.5%. The 30-Year Yield printed its highest level since November as the Tsy prepares for more long dated issuance.
• The space looked through weaker than forecast US data; JOLTS Job Openings, ISM Mfg and Prices Paid all printing below expectations. A brief bid was unwound and tsys marginally extended losses as technical flows weighed.
• A recovery off session lows was seen as risk sentiment improved into the close, US Equities firmed off session lows and the dollar pared gains.
• Q2 Employment from New Zealand headlines in Asia today. Further out we have a thin docket with ADP Employment providing the highlight.