Marginally Higher Overnight

A softer than expected non-manufacturing PMI out of China saw a contractionary print for the first time since March '20 (and was accompanied by a largely in line with exp. manufacturing print), which provided some support for T-Notes, although the contract stuck to a thin 0-04+ range in Asia dealing. The contract last deals +0-02 at 133-19, 0-03 off highs as e-minis register fresh all-time highs, while the major cash Tsy benchmarks trade little changed to ~0.5bp firmer on the day. The PMI data represent the latest round of disappointing economic releases out of China, with worry evident re: the country's growth trajectory and expectations building for increased fiscal support (via an uptick in local government bond issuance) in the coming months.

• To recap, the belly outperformed once again on Monday, with the major benchmarks finishing 1.5-3.5bp richer on the day come the close of cash Tsy trade as the post-Powell rally continued. A block sale of US futures (-7,753, ~$1.484mn DV01) helped stall the rally in the late NY morning, before the space traded to fresh intraday highs as we moved through the afternoon. The move higher came alongside another uptick in the S&P 500, with volume subdued given the lack of headline catalysts and a UK holiday. Fed's Mester ('22 voter, hawk) told RTRS that "she is not yet convinced that recent inflation readings will be enough to satisfy the price stability goal the U.S. central bank revamped a year ago." Short-end flow was headlined by a 25K screen buyer of EDZ1 and a ~50K screen buyer of EDU3/Z3.
• Tuesday's U.S. docket will be headlined by the latest MNI Chicago PMI print and consumer confidence reading.