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Spill over from Friday's NY trade and stronger than expected CPI data out of New Zealand created some notable pressure for core FI markets during Asia-Pac hours. While there were some spurts of demand, a convincing bid never really came in, with weakness extending as we moved through the overnight session. Marginally softer than expected Chinese Q3 GDP data (accompanied by mixed monthly economic activity data) failed to provide a bid for core FI, with plenty of worry re: the Chinese economy already observed in recent weeks/months. BoE Governor Bailey also fanned rate hike speculation in the UK over the weekend, which would have provided some downward impetus.
- T-Notes breached cluster support on the sell off, to last trade -0-08 at 130-23, while the belly represented the weakest point of the cash Tsy curve, as the broader benchmarks cheapened by 2.0-3.0bp on the day. Flow was headlined by a 10K block buyer of TYZ1 130.00 puts.
- To recap, Tsys cheapened across the curve on Friday, with 5s leading the weakness as yields there rose by ~7.5bp, while the 30-Year tenor lagged when compared to the broader weakness on the curve, cheapening by ~2.5bp on the day. Pricing re: Fed hikes was at the fore, with a Sep '22 hike now fully priced (per OIS), while odds surrounding a Jun '22 hike are circa 50/50. Stronger than expected U.S. corporate earnings also applied some pressure to the space, as equities rallied, with a stronger than expected round of retail sales also weighing on Tsys.
- NY hours will see the latest round of U.S. industrial production data, which will be supplemented by Fedspeak from Quarles & Kashkari.