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A Touch Softer To Start


TYU2 nudges lower at the re-open after going out just above worst levels, as Asia-Pac participants react to Friday’ labour market report and hawkish weekend Fedspeak. The contract has failed to test Friday’s low and operates a little above worst levels, -0-02+ at 119-09+.

  • The weekend saw Fed Governor Bowman indicate that similar sized rate hikes to the 75bp hikes deployed recently should be on the table until inflation meaningfully decreases. Elsewhere, San Francisco Fed President Daly (’24 voter) reiterated her view that the Fed is “far from done yet” when it comes to its fight to bring down inflation, stressing the data dependence of the central bank (perhaps seeming a little more open to a larger than 50bp hike in the process). Chinese trade data for July revealed a wider than expected surplus aided by much firmer than expected exports. Meanwhile, continued tension surrounding Taiwan also generated plenty of headlines.
  • To recap, a much firmer than expected U.S. labour report, consisting of a notable headline beat for the NFP reading (+528K vs. BBG median +250K), accompanied by positive revisions to the headline, upside surprises for AHE readings and a downtick in unemployment levels (albeit aided by a dip in the participation rate) tiggered bear flattening of the Tsy curve, with cash Tsys going out 10-19bp cheaper on the session. The labour market report ultimately pushed FOMC dated OIS to price ~67bp of tightening for the September FOMC come Friday’s close (vs.~57bp pre-release), while December FOMC dated OIS rose to 3.56% from 3.40% pre-release (note these are closing levels for the day, not intra-day highs). The Tsy space held onto the bilk of its post-data cheapening through the NY session, with afternoon trade proving to be relatively limited, although the post-data dynamic and subsequent repricing of FOMC tightening premium resulted in an above-average session on the volume front.
  • Post-data flow was headlined by a block sale in FV futures (-15K), although some were keen to fade the move in TU futures (with over 15K lots blocked in that contract over a couple of clips), while block buys in TY and UXY futures were observed later in the session.
  • There isn’t anything in the way of tier 1 data release slated for Asia-Pac hours, which will leave the digestion of weekend news flow at the fore. Looking ahead, NY hours will see the release of NFIB small business optimism and unit labour cost data.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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