A Soft Start For Futures In Holiday-Thinned Trade

TYU2 moves lower in early trade this week, although remains comfortably within the recently observed range, last dealing -0-11 at 115-27. This comes as e-mini futures and crude oil move higher.

• To recap, the broader cash Tsy curve bear flattened on Friday, although ranges were contained in comparison to recent sessions. Benchmark Tsys were 2.5-8.5bp cheaper come the bell, with most of the focus falling on Fedspeak, as Chair Powell stressed the Fed’s “unconditional” commitment to restoring price stability. That, coupled with some stability in the equity space, after the recent tumult, appeared to apply pressure to U.S. Tsys, although falling oil prices and a subsequent pull lower in breakevens seemed to limit losses for Tsys.
• Weekend Fedspeak saw Governor Waler intimate support for another 75bp hike in July, if the data matches his expectations, as he echoed Powell’s commitment to fighting inflation. Elsewhere, Cleveland Fed President Mester (’22 voter) suggested that it would take 2 years for U.S. inflation to return to the Fed’s target, while Atlanta Fed President Bostic (’24 voter) deployed the fabled “whatever it takes” phrase, pointing to a need to be more muscular with policy moves.
• U.S. Tsy Secretary Yelen also weighed in on inflation over the weekend, pointing to “unacceptably high” prices being likely through the remainder of this year, although she continues to hold the view that a recession is not inevitable.
• The Asia-Pac docket is headlined by the monthly PBoC LPR fixing (consensus looks for no change in the 1- & 5-Year LPRs), while European politics will move to the fore as into London trade, with French President Macron set to lose his absolute majority in parliament (per exit polls released after Sunday’s legislative elections).
• A quick reminder that the observance of the Juneteenth holiday will limit wider liquidity on Monday, in addition to resulting in the closure of cash Tsys and curtailed trading for Tsys futures.
• Note that Monday will see St. Louis Fed President Bullard (’22 voter) comment on inflation and interest rates.