A Touch Cheaper, Debt Ceiling Dynamics Dominate

Tsys remain biased cheaper as London dealing gets underway, with the weakness in Bunds (flagged recently) adding to Asia-Pac reaction to Friday’s cheapening in Tsys. Cash Tsys are 1-2bp cheaper across the curve, with 7s cheapening the most. TY futures are 0-00+ off the base of a 0-06+ range, although bears aren’t threatening last week’s lows in the contract, yet.

• News that President Biden and Congressional leaders are set to meet on Tuesday, along with “constructive” background talks ahead of the event (although Biden stressed that the talks aren’t there “yet”), garnered most of the attention over the weekend.
• Fedspeak from Governor Jefferson and St. Louis Fed President Bullard failed to move the needle over the weekend, while Richmond Fed President Barkin noted that nascent signs of cooling consumer demand may already be pulling down price pressures, meaning the Federal Reserve can hold interest rates where they are, but he is "very open" to supporting more rate rises should the data tell a different story, in an interview with MNI late on Friday.
• FOMC-dated OIS is now showing ~72bp of cuts by year-end (from current terminal rate pricing, with only ~2bp of hikes priced in for June’s gathering) after adjusting to UoM inflation expectations data on Friday.