Asia Hours See Further Firming

The mix of the Taliban taking the Afghan capital of Kabul, lower oil prices, general worry surrounding COVID and a softer than expected round of Chinese economic activity data for July combined to support the broader core FI bid during Asia-Pac hours.

• T-Notes trade +0-11 at 134-09+ as a result, a little shy of best levels. The major cash Tsy benchmarks run ~1.0-3.0bp richer on the day, with 7s outperforming on the curve. Pockets of TYU1 buying helped to support the space, with that contract running on more than healthy volume of ~167K ahead of European dealing.
• Minneapolis Fed President Kashkari (Dove, '23 voter) spoke on a BBG podcast. He noted that he wants to see a "few more" strong labour market reports before tapering bond purchases, underscoring the need to get the labour market back to at least pre-COVID levels of strength.
• To recap, the curve bull flattened on Friday, with 10s leading the bid, richening by ~8.0bp come the bell. A disappointing headline UoM sentiment reading provided support to the space during the final NY session of the week, with broader headline flow limited during U.S. hours. The rally came despite a 5.0K block sale of TYU1 futures during the middle of the NY morning, with volume lower than average in both the futures and cash spaces come the bell.
• Looking ahead to Monday's NY session it will be the Empire manufacturing survey that headlines a limited U.S. docket.