Futures Ease From Monday's Rally, Fed Commentary Remains The Focus

Treasury yields are sharply lower in the restart of cash trade following Monday's holiday, but are off session lows, with futures weakening.

• The curve has seen significant bull flattening, but all in catching up with Monday's futures gains: 2-Yr yield is down 8.9bps at 4.9927%, 5-Yr is down 12.7bps at 4.63%, 10-Yr is down 12.9bps at 4.6716%, and 30-Yr is down 11.9bps at 4.8488%.
• However futures are weaker Tuesday: TYA -8.5 ticks at 107-18+, having rallied a full point Monday in part on the Israeli conflict safe-haven bid, but also on FOMC commentary (Logan, Jefferson) that higher Tsy yields could restrain further Fed funds hikes.
• With that in mind, multiple Fed speakers are the focus today: NY Fed SOMA manager Perli, as well as FOMC members Bostic, Waller, Kashkari, and Daly all appear.
• September's NFIB small biz survey showed a modest deterioration in optimism, but was not a market mover.
• The only remaining data for the session are wholesale inventories at 1000ET, and NY Fed inflation expectations at 1100ET. Most attention is on September's CPI report on Thursday, with PPI offering a prelude Wednesday.
• October's coupon supply kicks off today with an auction for $46B in 3Y Note - our monthly Treasury Issuance Deep Dive was published this morning (PDF here).