Coiling Into CPI, Twist Flattening With Block Sale Of FV Weighing On the Belly

TY futures register an incremental session low after a block sale in FV futures (-1.8K) helped apply some pressure in the latter rounds of Asia-Pac dealing. Still, the contract holds to a narrow 0-05 range on sub-standard volume of ~64K. As a reminder, there wasn’t much in the way of actionable headline flow in Asia-Pac hours, leaving the curve with a light twist flattening bias as the major benchmarks run 2bp cheaper to 0.5bp richer, pivoting at the 10-Year point.

• CPI headlines the NY docket today (you can see our full preview of that event here), with real AHE data and 10-Year Tsy supply (in the wake of yesterday’s very well-received round of 3-Year auction).also due.
• The FOMC-dated OIS strip paints a fairly familiar picture ahead of this week’s key data release, pricing only a residual chance (~5bp or ~20%) of a 25bp hike next month (a little higher than levels seen around this time yesterday), with ~70bp of cuts priced by year-end (vs. current terminal rate pricing).
• We should also keep an eye out for debt ceiling-related comments as the ‘X-date’ estimate of early June ticks closer. Yesterday’s meeting between President Biden and Congressional leadership was deemed “productive” by the former, with another meeting scheduled for Friday. Still, GOP House Leader McCarthy noted little movement when it came to the negotiations, even as Senate GOP leader McConnell attempted to play down any worry re: a looming default.