Futures Softer At Re-open, Above Thursday’s Lows

A downtick for TYM2 at the re-open as Asia-Pac participants react to Thursday’s Tsy weakness. The contract last trades -0-04 at 118-20, 0-06 off of Thursday’s low.

• To recap, Tsys were cheaper on Thursday, with the major cash benchmark yields across the curve rising by 5-11bp come the bell. The curve bear flattened as 5s led the sell off, briefly showing above 3.00%, before falling back and closing below that level as Tsys finished off of intraday cheeps.
• Firmer than expected domestic data had little in the way of direct impact on Tsys, with global central bank speak applying more decisive pressure to core global FI markets.
• Hawkish ECB speak from de Guindos (Vice President and usually dovish) and Wunsch provided a catalyst in early European hours, although President Lagarde was a little more balanced (albeit more than willing to flag upside inflationary risks) in her own communique.
• Fedspeak saw Chair Powell point to an unsustainably hot labour market, while he reiterated that a 50bp rate hike could come at the May FOMC meeting, indicating a preference for a degree of frontloading when it comes to policy normalisation. Meanwhile, St. Louis Fed President Bullard (’22 voter) continued to beat the drum for a 75bp rate hike, playing down the ultimate impact of such a move, while noting that “the bond market is not a safe place to be.” San Francisco Fed President Daly (’24 voter) reaffirmed the need for expeditious tightening towards neutral, noting the likelihood of 50bp rate hikes at a couple of meetings in ’22, with open questions remaining re: how restrictive policy ultimately needs to be, while indicating hope that the U.S. will be able to avoid a recession as the Fed tightens. FOMC dated OIS priced in over 150bp of cumulative tightening across the next 3 meetings at one point on Thursday i.e. 3x 50bp rate hikes were more than fully priced, before paring back from extremes to price a cumulative 146bp over that horizon at typing.
• There isn’t much when it comes to tier 1 market moving data due during Asia-Pac hours, while Friday’s wider docket will be headlined by flash PMI data from across the globe.