Bear Flatter Ahead Of Powell, 20Y Supply

Treasuries have partially bounced from an overnight sell-off triggered by strong UK inflation data sinking Gilts, but yields remain elevated on the day.

• TY futures have retraced almost all of the 9 tick dip at the lows following UK CPI (in sympathy with a Gilt bounce), but the curve remains bear flatter, with 2Y yields up 2.2bp vs 10Y up 1.4bp and 30Y up 0.6bp.
• Amid a fairly light schedule for US data (MBA mortgage data at 0700ET the lone point on the docket), Fed communications will be the focus. Chicago's Goolsbee speaks at 1225ET but the main event is Day 1 of Chair Powell's 2-day semi-annual testimony in Congress which starts at 1000ET today but text could be released earlier.
• Our preview of the testimony is here - we'd expect a message that is mostly in-line with the June FOMC meeting outcome, with attention paid to his characterization of July's meeting as "live" and the potential for rates to rise 50bp in line with the latest Dot Plot.
• In supply we get $12B 20Y Bond re-open at 1300ET (anf $46B 17W Bill at 1130ET).

Latest levels:

• The 2-Yr yield is up 2.2bps at 4.7066%, 5-Yr is up 1.4bps at 3.9672%, 10-Yr is up 1.4bps at 3.7344%, and 30-Yr is up 0.6bps at 3.8178%.
• Sep 10-Yr futures (TY) down 3/32 at 113-07 (L: 112-31.5 / H: 113-12)