Marginally Cheaper Overnight, Labour Market Data Eyed

Tsys are little changed into London hours, with a very modest cheapening bias observed during most of the overnight session, while e-minis were bid and the broader USD traded on the defensive. TYZ2 +0-00+ at 117-03, operating in a 0-05+ range on ~60K lots. Cash Tsys print flat to 1bp cheaper across the curve.

• A slightly stronger-than-expected round of official PMI data out of China was seen, although the m’fing reading remained in contractionary territory.
• Rates traders were willing to stay on the sidelines awaiting the latest inputs to gauge the likely size of the Fed’s September rate step.
• A block buyer of TYZ2 futures (+10K, DV01 ~$703K) helped the space away from cheaps during the latter rounds of Asia dealing.
• Looking ahead, the refreshed ADP employment data and the latest MNI Chicago PMI print will hit in NY hours, with Fedspeak from Cleveland Fed President Mester (’22 voter), Atlanta Fed President Bostic (’24 voter) and perhaps new Dallas Fed President Logan (’23 voter) all eyed.
• Ultimately, this week’s broader focus is on Friday’s NFP print, with the Fed stressing its central message ahead of its Sep meeting (debate open re: 50-75bp hike, data-contingent, with ~67bp currently priced by OIS). Tuesday’s JOLTS job opening print presents an upside risk to Friday’s headline NFP reading, but the ADP employment print and ISM m’fing employment component may change perceptions between now and then.