Asia Assesses NFPs, Digests Weekend News Flow

TYU2 nudges back towards Friday’s lows at the start of the new trading week, with participants weighing up the impulses from ECB hawk Holzmann providing another aggressive view when it comes to the need for immediate monetary tightening, the Japanese ruling coalition expanding its majority in the upper house of parliament, fresh Chinese COVID restrictions/worry in Macau and Shanghai and continued worry re: the European gas supply situation. Also note that there is an expectation that the U.S. & Chinese Presidents will speak in the “weeks ahead,” with President Biden noting that his administration is conducting further discussions re: tariffs on Chinese goods. The contract last prints at unchanged levels of 117-20.

• To recap, the front end of the Tsy curve led the way lower on Friday, aided by a monthly NFP report that was devoid of anything in the way of meaningful downside surprises, with a comfortable headline beat and shunt lower in the U6 unemployment rate providing the highlights. This triggered the bear flattening that was observed, leaving the major Tsy benchmarks running 6-10bp cheaper come the close. Fedspeak saw NY Fed President Williams (permanent voter) underscore the need for forceful action to combat inflation, while Atlanta Fed President Bostic (’24 voter) flagged his support for a 75bp hike later this month.
• Looking ahead, there isn’t anything in the way of meaningful macro risk events slated for Asia-Pac hours, with a national holiday in Singapore set to hamper liquidity in pre-London trade. Meanwhile, Monday’s NY docket includes another appearance from NY Fed President Williams (with the address set to focus on the LIBOR transition) and 3-Year Tsy supply.