Yields Fall, Powell Acknowledges Disinflation After 25bp Hike

TYH3 deals at 115-12, 0-03+, in line with levels seen late in the NY session.

• Cash Tsys finished 6-11bps richer across the major benchmarks on Wednesday.
• ADP Employment was weaker than expected with Tsys briefly extending gains early in the NY session. There was a muted reaction to the ISM Manf Survey and JOLTS Job Openings as tight ranges were respected in the lead up to the Fed rate decision.
• Tsys were pressured in the immediate aftermath of the rate decision, as the Fed met expectations and raised rate by 25bps with the statement noting “ongoing rate increases” will be required.
• Losses were pared and and then subsequent gains extended during the press conference as Powell noted "the disinflation process has begun" and he didn't push back on the easing of financial conditions.
• OIS markets now see the terminal rate at ~4.9%, with ~20bps of hikes priced into the March meeting. 50bps of cuts have been priced in by December 2023.
• There is a thin data calendar in APAC today. Further out we have the BOE rate decision before the ECB rate decision and President Lagarde's press conference. Also on the wires is U.S. Factory Orders, Initial Jobless Claims and Durable Goods.