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Carry-Over Selling on Persistent Inflation

Tsys mildly weaker, carry-over selling in short end after last Fri's hot PCE read points to "more to do" by the Fed to reel in inflation, yield curves flatter but off lows.
New contract lows for 2s: TUH3 taps 101-17.75, 2YY hits 4.8530% - highest level since July 2007; USH3 123-22 low, 30YY 3.9467% high.
  • Tsy Mar/Jun roll winding down (over 90% complete), June takes lead quarterly tomorrow. Month-end may present additional rebalancing related trade.
  • Economic data kicks off the week (modest reprieve from data-event risk this wk on net) with Durable Goods Orders (5.6%, -4.0%), ex-trans (-0.2%, 0.2%) and Cap Goods Orders Nondef Ex Air (-0.1%, -0.1%), ship (-0.6%, 0.0%) release at 0830ET. Pending Home Sales MoM (2.5%, 1.0%), YoY (-34.3%, --) at 1000ET and Dallas Fed Mfg Activity (-8.4, -9.3) at 1030ET.
  • Scheduled Fed-speaker: Gov Jefferson on inflation, Fed mandate, text, Q&A at 1030ET. Boston Fed President Susan Collins said Friday she sees the need for more rate increases amid high inflation and then likely holding there for an extended period of time.
  • Tsy issuance: $60B 13W, $48B 26W bill auctions today at 1130ET.
  • Geopol risk: Eye on US/China tensions after US Plane In Taiwan Strait 'Disrupts Regional Situation': MNI (London)-Comments from the Chinese military stating that it has closely monitored a US military P-8A aircraft as it traversed the Taiwan strait.

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