Light Bear Flattening In Play At Start Of Risk-Laden Week

Cash Tsys hold the light bear flattening impulse witnessed overnight to sit 0.5-1.5bp cheaper on the day, while TYU3 futures trade around the middle of their 0-06+ range, -0-01+ at typing.

• It was a news flow light Asia-Pac session, with little in the way of meaningful weekend headlines to digest.
• The latest FT survey revealed that “the U.S. Federal Reserve will need to take tougher action than expected to root out inflation, according to a majority of leading academic economists polled by the Financial Times, who predict at least two more quarter-point interest rate increases this year.”
• That is more aggressive than the ~21bp of cumulative tightening priced through July (which represents the current terminal rate view of the market), with only 7bp of tightening priced for this week’s FOMC.
• The broader docket is slim today, with comments from BoE’s Mann and double Tsy supply (in the form 3- & 10-Year paper, in addition to Bills) set to receive the bulk of the attention.
• Tuesday’s CPI & Wednesday’s FOMC decision represent this week’s key risk events.