Fresh Cycle Highs For Most Benchmark Yields

Spill over from Bunds/French political matters weighed on the U.S. Tsy space during the first Asia-Pac session of the week, with TYM2 -0-16 at 119-20 ahead of London hours, 0-03 off the base of the 0-18 overnight range, on volume of ~150K. Cash Tsys are 4.5-7.5bp cheaper across the curve, with bear flattening in play. Note that 3- to 30-Year yields tagged fresh cycle highs during Asia-Pac dealing.

• French President Macron’s lead in the first round of the country’s Presidential election drove the space lower (pollster projections point to a narrow Macron victory vs. far right candidate Le Pen after the second round of voting, which is due in a couple of weeks), with Bunds shedding over 100 ticks at one point, before correcting from worst levels.
• Furthermore, oil futures were under pressure during the Asia-Pac session, shedding over $2.00/bbl, which reduced some of the stagflationary worry in markets. Although the fact that that dynamic was seemingly driven by Chinese growth/COVID worries may negate some of the explanatory power when it comes to the move in U.S. Tsys.
• Asia-Pac flow was headlined by FV put block sales which seemed to involve rollng down and out the expiry curve (-10.0K FVK2 113.25 puts vs. +15.0K FVM2 112.50 puts) and a block sale of TUM2 futures (-7.4K).
• Weekend Fedspeak from Cleveland Fed President Mester (’22 voter) pointed to elevated inflation through ’23, although she noted that Fed policy will allow the trajectory of inflation to shift lower, while expressing optimism re: the potential for continued economic expansion even as the central bank tightens policy.
• Fedspeak from Governors Bowman & Waller, Atlanta Fed President Bostic (’24 voter) & Chicago Fed President Evens (’23 voter) headline during NY hours.