Fiscal Dominates All

The start of the week has been dominated by broader focus on the prospects of a sizeable fiscal support package in the U.S., with Treasury Secretary Yellen and President Biden continuing to push home the need for notable assistance for the economy (although it looks like minimum wage hikes will have to wait, at least for now). The continued moderation in U.S. COVID cases is also helping risk-positive flows, although worry re: the spread of the UK strain of the virus around the U.S., in addition to issues pertaining to the efficacy of the Oxford/AstraZeneca vaccine in combatting the South African strain of the virus may be limiting broader follow through. Elsewhere, Sino-U.S. tensions are not expected to ease any time soon, especially on the back of the rhetoric provided by U.S. President Biden & Secretary of State Blinken over the weekend, although they will likely be on a more predictable and less spontaneous trajectory than what was seen during Donald Trump's term. Ultimately, the U.S. Tsy curve has been subjected to some bear steepening on the aforementioned fiscal matters, with 30-Year yields threatening to break above 2.00%, cheapening by ~2.0bp on the day, while S&P 500 e-minis had a very brief, and very limited look above the 3,900 mark, tagging a fresh all-time high in the process. T-Notes last -0-03+ at 136-18+, hovering just off worst levels of the day, but sticking within Friday's range. 10-Year breakevens hit fresh cycle highs in Asia, aided by another uptick in crude oil futures.

• Friday saw some twist steepening of the cash Tsy curve, with the weaker than expected NFP print (which was accompanied by broader based disappointment, outside of the AHE print) supporting the shorter end on anchored Fed expectations, while the longer end was subjected to pressure on the back of the fiscal dynamic that a softer than expected run of labour market data may bring. Long end swap spread widening also helped underpin the general steepening theme.
• Fedspeak from Mester headlines a slim local docket on Monday, with focus already turning to this week's 3-, 10- & 30-Year Tsy supply.