Back From Best Levels As Europe Settles In

Cash Tsys sit a touch richer this morning, even with the weekend debt-ceiling dialogue between Biden & McCarthy turning more positive vs. how the situation was left as of Friday’s close, when GOP lawmakers walked out of discussions. Still, some weakness in German fixed income has added to the move away from richest levels of the Asia-Pac session, leaving the major benchmarks running 0.5-2bp richer, with the front end outperforming, and TYM3 in the middle of its 0-08 range.

• Weekend utterances from ECB’s Lagarde failed to provide much in the way of meaningful spill over for Tsys, while Minneapolis Fed President Kashkari (’23 voter) told the WSJ that he is “open to the idea that we can move a little bit more slowly from here,” which will have factored into the richening in Tsys as it dominated the headline feeds, even as he noted that he “would object to any kind of declaration that we're done.” That was because he told the WSJ that “If the committee chooses to skip a meeting because we want to get more information, I could make the argument why that makes sense.”
• A handful of bp of tightening remains priced for the FOMC’s June meeting, while FOMC-dated OIS points to just under 50bp of cuts during the remainder of ’23 vs. current terminal rate pricing.
• Fedspeak from Barkin, Bostic, Bullard & Daly will be received today, with a Biden-McCarthy debt ceiling meeting introducing another risk event.