US Yields Off Fresh Cycle Highs, Housing Data Eyed Again

Bear flattening has been the general theme in early European trade, with German instruments underperforming globally.

• An improvement in risk sentiment overnight on possible easing of China Covid quarantines for inbound travelers helped boost equities and weaken the USD, putting downward pressure on core FI.
• Since then though, US yields have retraced after hitting new cycle highs, with 2Y yields reaching 4.6100% and 10Y 4.1778%.
• Amid political uncertainty (with probability rising of PM Truss' departure from office), UK yields have been underpinned by comments from BoE's Broadbent who described the risks to market rate hike pricing as more to the downside (though he stopped short of directly saying pricing isn't appropriate).
• Italian spreads are marginally tighter, a combination of the Bund weakness and a modest BTP rally.
• More US housing data today in focus with existing home sales, alongside Philly Fed and initial jobless claims. FOMC speakers include Bowman, Cook, and Jefferson. Overnight, Chicago's Evans said he hoped the latest Dot Plot's hikes would be "enough".

Latest yields:

• US: 2Y yield up 2.8bps at 4.5844%, 5Y up 1.4bps at 4.3712%, 10Y up 1.5bps at 4.1485%, 30Y up 1.9bps at 4.144%.
• DE: 2Y yield up 6bps at 2.155%, 5Y up 6.5bps at 2.278%, 10Y up 5bps at 2.426%, 30Y up 4.4bps at 2.391%.
• UK: 2Y yield up 2.9bps at 3.535%, 5Y up 4.2bps at 3.914%, 10Y up 4.8bps at 3.926%, 30Y down 0.3bps at 3.986%.
• Italy / German 10Y spread 1.9bps tighter at 237.8bps