Belly-Led Weakness On Monday

T-Notes operating around late NY levels, -0-01 at 131-24+, after finishing a little off of early NY lows on Monday.

• Cash Tsy trade saw cheapening across the curve, with circa 1.0-4.5bp of weakness witnessed come the bell, as 7s led the way lower. The space finished off of intraday cheaps, with a downtick for the S&P 500 perhaps limiting the weakness, while there was plenty of talk of convexity-related hedging when it came to a source of pressure for the space.
• Worst levels of the day came on the back of firmer than expected flash durable goods data.
• Monday's Fedspeak continued to greenlight a taper in the coming months, affirming the message at the centre of last week's FOMC decision and subsequent press conference, with the clear delineation between tapering and rate hikes remaining evident (although Brainard and Evans continue to fall on the dovish side of the central view).
• Meanwhile, Dallas Fed President Kaplan & Boston Fed President Rosengren noted that they will step down from their respective roles in light of their recent trading disclosures, although Rosengren's resignation pointed to health issues.
• 2-Year supply saw a 0.8bp tail with the cover ratio cratering and dealer takedown jumping above the recent average, a casualty of a truncated supply schedule/Fed policy views. 5s saw a warmer acceptance, stopping through WI by 0.4bp, with the cover ratio holding steady around the recent average, although dealer takedown ticked above its own recent average.
• Tuesday's docket is headlined by 7-Year supply, consumer confidence data, Fedspeak from Powell (accompanied by Tsy Sec Yellen, although transcripts have already been released), Bowman, Bostic & Evans, as well as the continued fiscal debate on the Hill.