A Touch Lower Early On In Asia

TYM2 takes a brief look below Friday’s low at the re-open, but lacks any real traction early on, last dealing -0-13 at 118-24.

• Weekend news flow hasn’t really impacted price action early on. Fresh source BBG reports pointing to the potential for European countries to propose a ban on Russia by the end of the calendar year (albeit with Hungary already outlining its desire to veto any such move) were evident over the weekend, in addition to tighter COVID restrictions in the Chinese capital city of Beijing (partially countered by positive developments surrounding COVID in shanghai). Softer than expected Chinese PMI data was also released over the weekend, with the breakdown of the data including soft demand metrics (plummeting inventory/order ratios), increased delivery times and inflation worry.
• To recap, the curve flattened in a bearish direction on Friday, with equities trading heavily (the S&P was down by over 3.5%, while the NASDAQ 100 shed over 4.0% in the wake of Apple & Amazon earnings and cautious guidance after hours on Thursday) and U.S. spending and employment cost data topping expectations (PCE inflation metrics were largely in line with expectations, as was the final UoM sentiment data, while the headline MNI Chicago PMI print expanded at a slower clip than expected), while there was a lack of meaningful month-end support evident late in the NY session. A couple of block sales of TU futures also helped the front-end to lead the way lower (-5K & -10K), while the OIS strip pricing in a 50/50 chance of a 75bp hike at the Fed’s June meeting added additional pressure. Benchmark Tsys were 10-12bp cheaper across the curve come the bell.
• There isn’t much in the way of major data/risk events slated for Asia-Pac hours, while liquidity will be limited by the observance of holidays in China, Hong Kong & Singapore, which will leave reaction to the weekend news flow, and any fresh headlines at the fore. A UK holiday will also thin out liquidity in European hours. Meanwhile, the latest ISM manufacturing survey headlines in U.S. hours, with the week set to be headlined by the latest FOMC decision (Wednesday) & NFP release (Friday).