Bear Flattening As Some Banking Sector Uncertainty Abates

The Treasury curve has bear flattened in overnight trade, with the entry of US desks accelerating the move a little. 2Y yields sit 7+bp higher on the session, with more modest moves further down the curve (10s up 3.4bp, 30s up 1.7bp).

• The main headline overnight was the FDIC's sale of First Republic Bank to JPMorgan, resulting in a very modest weakening in Treasuries as FRC-related uncertainties abated. JPM will hold a media call at 0800ET.
• 2s10s have now fully retraced the disinversion seen after First Republic Bank concerns resurfaced mid-last week, last at -63.2bp (had hit -48.7bp on Weds.)
• It's a holiday-thinned trading session so far, to be sure, with European markets closed: front TY volumes stand at just 130k.
• The JPM-FRC news hasn't moved the needle much on Fed hike pricing, despite some analysts having seen the uncertainty as a lingering risk to the Fed's communications if not decision going into the 2-day FOMC this week.
• May pricing sits just above 22bp, up 1+bp, implying a near-lock for 25bp. Terminal Funds rate (upper limit) pricing +3.1bp to 5.29% by June, with 55-60bp of cuts by year-end seen after that.
• Attention the rest of the session is on ISM Manufacturing at 1000ET, alongside construction spending. April Manuf PMI at 0945ET is a final reading.