A Soft Start To Q2

We got a weaker start to Q2 for the U.S. Tsy space as Asia-Pac participants reacted to late NY dealing weakness, before a light bid came in as the latest Chinese Caixin m’fing PMI print was softer than expected, representing the fastest rate of contraction observed in the reading since the COVID outbreak-driven contraction in Feb ’20. The survey collator noted that production fell at the quickest rate observed for just over two years amid tighter COVID restrictions. Steep declines in total new work and foreign demand were also een, while suppliers' delivery times worsened and cost pressures intensified. That made for pretty grim reading all around. The space then drifted lower again, with TYM2 making fresh session lows. The contract is last -0-19 at 122-09, 0-01+ off the base of its 0-14 overnight range, while cash Tsys are 4-5bp cheaper across the curve. Flow was dominated by block buying of the FVK2 113.75 puts (2x 2.0K).

• Looking ahead, NY hours will be dominated by the latest NFP print (see our full preview of that release here). Elsewhere, the monthly ISM m’fing print & Fedspeak from Chicago Fed President Evans (’23 voter) are due. We also note that Russia-Ukraine discussions will resume (in an online format).