China Positives Apply Light Pressure

TYM2 is marginally below late Friday NY levels, -0-01+ at 119-04, although the contract hasn’t breached the lower boundary of Friday’s range. Participants are assessing weekend news flow, which was headlined by China cutting mortgage rates for first-time property buyers, Shanghai’s gradual re-opening from today, India imposing restrictions on wheat exports and Sweden & Finland being on course to lodge NATO membership applications. The positives surrounding China seem to be dominating, with e-minis 0.2-0.6% above settlement levels, with the NASDAQ leading.

• To recap, the Tsy curve bear steepened on Friday, with the major benchmark Tsys running 2.0-8.5bp cheaper come the bell. A rally in equities helped heap the pressure on, with rhetoric from Fed Chair Powell re: two-way risks to the wider Fed tightening cycle (outside of his preference for a couple of 50bp hikes at the next couple of meetings)/noting that the ability to deliver a soft landing may be impacted by factors that are outside of the Fed’s control, later echoed by Cleveland Fed President Mester (’22 voter), also pointed to (by some) as a driver of the sell off. Flow also fed into the wider steepening move, with a UXY/US block steepener noted (+4,475/-3,000). Note that a fresh cycle low for the headline UoM sentiment reading helped the space find a base during the NY morning, before the long end posted fresh session cheaps into the close.
• Chinese economic activity data and the latest round of PBoC MLF operations will garner most of the focus during Asia-Pac hours. Further forward, NY Empire manufacturing data and Fedspeak from NY Fed President Williams headline the NY docket on Monday.