Eying Powell

TYU2 operates around late NY levels, last dealing +0-04+ at 115-30.

• To recap, cash Tsy yields finished the first session of a curtailed trading week little changed to 6bp cheaper, bear steepening. The early bearish impetus stemming from hawkish Fedspeak during the elongated weekend, U.S. Tsy Sec Yellen’s latest inflation warning, spill over weakness from EGB & Gilt trade on Monday and a bounce in equities faded a little as we moved through the NY session. Note that TYU2 failed to take out its Asia-Pac trough, finishing off worst levels, with a sizable block buy in FVU2 futures (+7,603) helping the space away from lows late in the day.
• Also note that a growing $IG supply slate helped apply pressure to the space (evidenced by the widening of longer dated swap spreads).
• There isn’t much of note when it comes to Wednesday’s Asia-Pac economic calendar. Meanwhile, Fedspeak dominates Wednesday’s NY docket, with day 1 of Chair Powell’s semi-annual testimony on the Hill headlining. Elsewhere, Evans, Harker & Barkin are all due to speak. 20-Year Tsy supply will also take place, with only second tier local data evident, in the form of the weekly MBA mortgage applications print.