Marginally Steeper After Friday's Bull Flattening

T-Notes last +0-02+ at 130-13+, operating within a 0-05+ range overnight, with cash Tsys running unch.-1.5bp cheaper across the curve, unwinding a small portion of Friday's late rally/bull flattening in the process. The moves witnessed early this morning have likely been geared towards regional Asia players looking to fade Friday's rally/profit taking on any short-term longs, in addition to fresh cycle highs for crude futures, as opposed to reaction to headline flow. The weekend saw Tsy Sec Yellen note that she exp. inflation to remain high through H122, while playing down worry of a loss of control when it comes to inflation. Elsewhere, headlines have pointed to progress in the fiscal back and forth amongst Democrats on the Hill, although no ultimate solution was offered.

• To recap, U.S. Tsys firmed on Friday, with 2s little changed and 30s over 7.0bp richer on the day, with bull flattening at the fore in NY hours. Fed Chair Powell stuck to script when it came to the end game re: inflation (even with plenty of uncertainty evident re: the latter, noting that such pressures are likely to last longer than prev. exp.), despite a surge in market rate hike pricing. Still, Powell did note that the Fed would hike rates if serious risks of higher inflation expectations become evident, although he once again played down the need for anything like an imminent rate hike. 2s initially cheapened on the comments, before easing back to unchanged levels as the long end richened into the bell. Some Brexit uncertainty also supported the space into the bell. This meant that 10s failed to challenge the mid-May highs (in yield terms), which were tested on Thursday.
• Regional Fed manufacturing indices will headline during Monday's NY session, with the Fed now in its pre-meeting blackout period.