Lets Twist Again

A lack of notable news flow since Friday's U.S. close didn't sedate activity during Asia-Pac trade, with e-minis trading through their respective Friday lows and the Japanese equity markets trading particularly heavy as the Asia-Pac region reacted to Wall St.'s negative lead. This accentuated the recent round of U.S. Tsy curve flattening, with 2s and 3s seeing some modest cheapening, while the remainder of the major benchmarks richened, led by the long end where 20- & 30-Year Tsy yields sit ~6bp lower on the day (albeit back from extremes). 10- & 30-Year yields printed at levels not witnessed since February, with the latter breaching the 2.00% level. T-Notes last trade +0-13+ at 132-23+, 0-06+ off highs, with volume at a more than healthy 305K. Eurodollar futures trade -0.5 to +2.0 through the reds, twist flattening, with a ~55K buyer of EDU1 with and a ~28K seller of EDH2 dominating on the flow side. There was also a 1,780 block buyer of TYU1 seen into London hours.

• As a reminder aggressive twist flattening of the curve was also seen on Friday, withs 2s cheapening by 4.5 bp, while 30s richened by 8bp, the pivot point was in the belly of the curve, with 7s ultimately little changed on the day. Hawkish comments from St. Louis Fed President Bullard (a '22 FOMC voter) applied pressure to the front end of the curve during the NY morning. Bullard noted that his dots (in the SEP) see a rate liftoff in late 2022, while he suggested that Chair Powell officially opened the discussion on tapering. Bullard was also concerned about feeding into what he deemed "housing froth", while "leaning toward the idea that the Fed may not need to be in MBS." Later in the day noted dove (Minneapolis Fed President) Kashkari ('23 FOMC voter) stressed that he wanted to keep rates near zero at least through the end of '23 to allow the U.S. labor market to return to its pre-COVID strength.
• Fedspeak dominates the local docket on Monday, with Williams, Bullard and Kaplan all due to speak.