Bostic Points To Slowing Of Hikes In Dec, China COVID Worry Eyed

TYZ2 firms at the start of the week, last dealing +0-01+ at 112-11.

• The weekend saw Atlanta Fed President Bostic (’24 voter) note that the Fed might raise interest rates more than anticipated to combat high inflation, but he stressed that officials can slow the pace of tightening when they convene next month.
• Elsewhere, weekend headlines saw plenty of focus on the COVID situation in China, with news that Beijing’s most populous district has urged its population to stay at home after similar guidance over the weekend and confirmation of China’s first COVID-related death in ~6 months, as well as worry re: case counts in some of the other major cities.
• To recap, the Tsy curve was subjected to bear flattening pressure in the final session of last week, as the major benchmarks finished 5-8bp cheaper.
• The 2-/10-Year yield curve registered another fresh cycle extreme in terms of the degree of inversion witnessed.
• The cheapening was aided by Boston Fed President Collins (’22 voter) suggesting that a 75bp hike is not off the table at the Fed’s December gathering, leaving ~55bp of tightening priced into FOMC dated OIS covering the Dec meeting, a couple of bp or so higher on the session. Bostic’s comments are clearly providing some counter to this early on.
• The PBoC LPR fixings headline the Asia-Pac docket on Monday, although no changes are foreseen there. Further out, NY hours will see the release of the Chicago Fed national activity index, 5-Year Tsy supply and Fedspeak from Daly (’24 voter).