Bear Flattening Extends, Bank Cares Moderate

Tsy futures drifted near late session lows Monday, yield curves bear flattening (2s10s -9.438 at -49.302, well off early high of -40.518) as regional bank share panic moderated to a degree.

• Early support for bank shares cooled around midday, KBW Bank index (BKK) gave up a more than half of their gains made on the open to a session low of 79.69, drifted off lows in the second half to approximately 80.75 in late trade. KBW "is a modified cap-weighted index consisting of 24 exchange-listed National Market System stocks, representing national money center banks and leading regional institutions."
• Front month 2Y futures extended lows (103-12.75, -15.75) after the $42B Treasury 2Y note auction (91282CGU9) tailed (second consecutive): 3.954% high yield vs. 3.915% WI; 2.44x bid-to-cover vs. 2.61x prior.
• Meanwhile, 10Y futures at 114-31.5 (10Y yield at 3.5261%). For a technical perspective, early 10Y signals suggest that Friday’s candle pattern - a shooting star formation - represents a possible short-term reversal. If correct, this suggests scope for weakness towards the 20-day EMA, at 114-00.
• Focus turns to Tuesday's Wholesale/Retail Inventories early, home price data and consumer confidence at midmorning. $43B 5Y Note auction (91282CGT2) auction at 1300ET.