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Worries surrounding an impending interest payment due on the part of embattled Chinese property developer Evergrande weighed on broader risk appetite during Monday's holiday-thinned Asia-Pac trade, with the absence of Japanese and Chinese markets hampering broader liquidity. The pressure pushed Chinese property developers listed in Hong Kong lower, while those with exposure to the sector also struggled. The S&P 500 e-mini contract crossed below its 50- & 55-DMAs in the process (these MA's have not seen a close below since March of this year).

  • Still, T-Notes stuck to a narrow 0-05 range, last +0-03+ at 132-28+, with volume running at ~59K. Cash Tsys will remain closed until London hours owing to the aforementioned Japanese holiday.
  • To recap, weakness in Bunds helped the Tsy space lower ahead of Friday's NY session, with the downward impetus extending in early NY dealing. The belly led the cheapening, with 7-Year yields rising by ~2.5bp on the day come the close. The space did manage to correct from worst levels, although weakness in equities failed to provide any meaningful bid, with desks pointing to expectations surrounding $IG issuance for the upcoming week and delta hedging as sources of pressure. Standout flow came in the form of a 25K block seller of the FVV1 123.25/123.00 1x2 put spread, while there appeared to be notable liquidation of 100K of existing longs in the TYV1 133.50/134.00 call spread.
  • The U.S. docket is virtually non-existent on Monday, with fiscal jousting on the Hill set to headline. Looking ahead, Tuesday will bring 20-Year Tsy supply, while Wednesday will see the latest FOMC decision.