As You Were

TYU2 operates around NY closing levels at the Asia re-open, last dealing -0-08+ at 115-29+.

• To recap, Tsy futures were lower on Monday, in a holiday-thinned, curtailed trading session, with cash Tsys closed as the U.S. observed the Juneteenth holiday. The initial move lower in Asia hours came on the back of continued hawkish speak from Fed Governor Waller over the weekend (backing a 75bp rate hike in July), while warnings from U.S. Tsy Sec Yellen re: elevated inflation being embedded through ’22 also fed into the move. Gyrations in equities then moved to the fore as we moved through Asia dealing.
• Central bank speak then became prevalent as we moved through the day, with hawkish BoE speak from Mann (who dissented in favour of a 50bp rate hike at last week’s BoE decision), while ECB President Lagarde flagged a pick up wage growth. These comments, coupled with a slightly wider OAT/Bund spread in the wake of French President Macron’s loss of an absolute parliamentary majority, seemed to apply pressure on Tsys as we moved through the day. Still, TU out to UXY futures failed to force meaningful extensions vs. Asia lows (indeed some of those contracts failed to test their overnight troughs), while WN & US futures managed to move through their early Asia lows. A bid in e-minis also helped the downward momentum as we moved through the holiday-shortened, low volume session.
• Elsewhere, St. Louis Fed President Bullard (’22 voter) noted that the Fed needs to follow through and deliver what the market expects when it comes to rate hikes. He stressed that the inflation situation “is risking the Fed’s credibility with respect to its inflation target," warning that "U.S. inflation expectations could become unmoored without credible Fed action."
• There isn’t much in the way of tier 1 macro vents to keep an eye out for in Asia-Pac hours, although various rounds of RBA speak will likely garner attention. Looking ahead, Tuesday will see the release of existing home sales data and the latest Chicago Fed National Activity Index print. Elsewhere, we will get Fedspeak from Mester & Barkin.