Bull Steepening Apparent Early On, As European CPI Readings Provide Downside Surprise

European participants settle down and assess the latest hawkish musings from Cleveland Fed President Mester (’24 voter) vs. softer than expected regional CPI data out of Germany & national CPI from France, as well as another round of weaker data out of China, this time in the form of the official PMIs.

• The data dynamic is winning out at present, as cash Tsys run 2.5-5.5bp richer across the curve, bull steepening, with the major benchmarks sitting at/just off session extremes, while TYU3 pierces its own early session high.
• FOMC-dated OIS is showing ~23bp of cumulative tightening through the July meeting, followed by 40bp of cuts by year-end., easing a little on the day given the aforementioned drivers.
• CPI data from some of Europe’s largest economies will continue to filter out through the day.
• Beyond that JOLTS job data and the latest MNI Chicago PMI will cross, in addition to the Fed’s Beige book and the Dallas Fed services activity metric. There will also be a raft of Fedspeak, including comments from Jefferson, Bowman, Collins & Harker.