Looking For Direction Early On

TYU2 operates around late NY levels at the re-open, last dealing +0-01 at 118-21+, with participants digesting weekend news flow surrounding the COVID situation in China (extension of the lockdown in Macau and multi-week highs for new daily cases on a national basis), the PBoC noting that it will step up the implementation of its prudent monetary to provide more meaningful economic support, a lack of commitment from Saudi Arabia when it comes to meaningfully boosting crude oil output and the WSJ’s Fed whisperer flagging a likely 75bp rate hike come the end of next week’s FOMC.

• A quick reminder that Friday saw the major Tsy benchamrks finish 1-5bp richer, with the 10- to 20-Year zone leading the ricehning. TYU2 went out around the middle of its session range.
• Fedpseak promoted some vol. on Friday, with St. Louis Fed President Bullard (’22 voter) not ruling out a 100bp rate hike at the Fed’s July meeting, indicating little difference between that or a 75bp step. Elsewhere, Atlanta Fed President Bostic (’24 voter) cautioned against moving too quickly on rates after previously noting that “everything is play,” while San Francisco Fed President Daly (’24 voter) flagged early signs that inflation is slowing.
• When it comes to local data, retail sales figures topped expectations, but were flattered by price rises, while the inflation expectations components of the latest UoM survey moderated, alongside downside misses for import price data. The headline retail sales readings provided some short-term bearish momentum, before a pullback from cheaps was observed, while the UoM inflation expectations components pulled the space away from fresh session cheaps later in the session.
• There isn’t anything in the way of meaningful macro data releases scheduled for Monday’s Asia-Pac session while the NY docket will only consist of second tier data (note that the Fed is now in pre-meeting blackout). Also note that the previously flagged Japanese holiday will likely limit wider market activity until London hours owing to the associated closure of Tsy markets during Asia-Pac dealing.