Wednesday's Flattening Extends In Asia

U.S. Tsys showed little in the way of reaction to the Chinese data dump, with the quarterly GDP and monthly economic activity readings generally in line to a touch firmer vs. broader exp. T-Notes struggled to extend through the July 12 high overnight (133-20+), with the contract topping out at 133-21, last printing +0-05 on the day at 133-19+. The cash Tsy curve has seen some modest bull flattening, extending the move seen on Wednesday, with 2s little changed on the day, while the longer end of the cash Tsy curve runs as much as ~2.0bp richer.

• The cash Tsy curve bull flattened on Wednesday, with the longer end of the curve richening by ~7.5bp come the close. Most of the rally came during the NY morning, with the text of Fed Chair Powell's testimony stressing that the central bank is a ways away from achieving its "substantial further process" marker, while underscoring that there is a need for continued discussions re: tapering "in coming meetings." On the geopolitical side of the coin a BBG sources piece suggested that "U.S. Treasury Secretary Janet Yellen and her staff have no plans to resurrect the regular U.S.-China economic dialogue that governed ties between the two nations during the Bush and Obama administrations, continuing for now the suspension put in place under President Donald Trump. While Yellen's team, and those of other departments, are in touch with Chinese counterparts, the expectation for now is not to restart formal high-level talks." Large screen buying of EDM2 dominated on flow side on Wednesday.
• Weekly jobless claims and some of the regional Fed activity indices are due to be released during NY hours. Elsewhere, Fed Chair Powell will testify on the Hill for a second day, while Chicago Fed President Evans ('21 voter) will speak on the economy. Elsewhere, the ECB is set to release a podcast conversation held by U.S. Tsy Sec Yellen & ECB President Lagarde.