Labour Day Makes For Tight Futures Trade, Despite Plenty Of Risk

T-Notes last +0-01+ at 139-02+, with the contract hugging a tight 0-03+ range as cash markets remain closed for the Labour Day holiday. Little to note on the headline front during Asia-Pac hours, outside of the broader weekend headline risks that have been flagged elsewhere (notably Brexit worry, tech sector underperformance in e-mini trade and Sino-U.S. relations surrounding chipmaker SMIC). Volume in futures has been respectable given the lower liquidity backdrop owing to the aforementioned U.S. holiday, with an eye on the broader impetus from e-minis.

• This comes after some aggressive curve steepening on Friday, facilitated by the latest NFP report, which included a much lower than expected unemployment reading and stronger round of wage data, while the headline NFP reading saw a modest beat vs. BBG consensus. There are plenty of areas within the report that require at least a degree of wariness/scepticism, but the net impact was enough to provide some notable pressure for the Tsy space, with T-Notes going out just off worst levels. A TY vs. WN block steepener helped extend momentum on Friday. Choppy trade for equities had some spill over. Outside of the data, participants had an eye on this week's chunky U.S. sovereign supply schedule, which includes 3s, 10s & 30s, in addition to the potential for sizeable corporate issuance flow.
• A reminder that Fed Chair Powell made a late appearance on Friday, before the traditional pre-FOMC meeting blackout went into play over the weekend. Powell told NPR that "we think that the economy's going to need low interest rates, which support economic activity, for an extended period of time…It will be measured in years."
• Chinese trade data had little impact on the space, with a wider than expected surplus witnessed as exports beat and imports missed expectations.
• Eurodollar futures sit unchanged to +0.5 through the reds.