Bear Flattening After Biden & McCarthy Agree To No Defaul

Tsys operate at/near session cheaps as London filters in. This comes after President Biden flagged an agreement with House Speaker McCarthy re: avoiding default, although an overarching debt ceilking agreement was not forthcoming at the end of Monday’s meeting between the two.

• TYM3 sits at the base of its narrow 0-05 range.
• Cash Tsys run little changed to 3bp cheaper as the curve bear flattens, with 2-Year yields showing through the multi-week highs printed on Friday.
• Ongoing debt-ceiling talks and related headlines will continue to garner the bulk of the attention as we move towards early June (Tsy Secretary Yellen once again warned that her department could run out of cash at that time). Outside of that, S&P Global flash PMIs, new home sales data, the latest economic activity indicator from the Richmond Fed and 2-Year Tsy supply present the focal points on Tuesday’s NY docket.
• We will also get comments from Dallas Fed President Logan (’23 voter), although she will be giving welcoming remarks at a conference on technology-enabled disruption, which limits the scope for meaningful monetary policy commentary after the hawkish shock she provided last week.