Bear Flattening On Pullback from Early Session Highs

Tsy futures have followed Bunds away from best levels, albeit with a slight initial lag, to last show +0-02+ at 111-06+, 0-02 off the base of its 0-07+ range. The contract managed to have a look above Friday’s high before fading, Friday’s low is 0-12+ below prevailing levels (110-26).

• Cash Tsys run 0.5-3.0bp higher, with the front end leading the move as the curve bear flattens.
• FOMC-dated OIS shows ~131.5bp of cuts through ’24, with only 10.5bp of easing now seen through the end of the Mar ’24 FOMC, comfortably off the recently observed dovish extremes after the well-documented recalibration of market pricing during early ’24.
• Weekend headline flow saw focus on Ron DeSantis suspending his campaign for the Republican presidential nomination and endorsing Donald Trump (Trump now has > 90% odds of winning the nomination, per, betting markets, as detailed in our earlier bullet).
• The local docket is light today, with only bill issuance and the leading index due.
• 3-. 5- & 7-Year Tsy coupon supply headlines on that side this week, the presence of that impending issuance may be aiding the bear flattening of the curve.
• Flash S&P Global PMIs (Wednesday) and regional Fed activity measures will eyed as the week progresses, along with durable goods (Thursday) & PCE (Friday) data.
• A reminder that the Fed is now in its pre-meeting blackout period ahead of next week’s FOMC.
• Also, the weekend saw headlines note that Treasury Secretary Janet Yellen will deliver what is being called a “major address” (on the US economy) on Thursday at ~13:35 NY.