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Market Roundup: Inflation Metrics Pointing to Tighter Policy

US TSYS
Tsys trade broadly weaker, back near early morning lows, 30YY currently +.1103 at 3.0739% vs. 3.0820% high, yield curves bear steepening/near highs (2s10s +4.751 at 30.549; 5s10s +1.436 at 3.302).
  • Several factors focused on rate hikes to combat rising inflation: Initial pressure appr two hours after Asia open came from WH statement US Pres Biden will meet with Fed Chair Powell at 1315ET today to discuss economy and inflation. Trading desks also citing higher crude levels (WTI +1.43 at 116.50) and record Eurozone inflation figures (consumer prices +8.1% vs. +7.8% est).
  • Real vol up but moderating as 10bp moves becoming the norm. Month-end extension for Tsys decent at 0.11, desks looking to sell into bounces like the one that occurred in lead-up to MNI's Chicago PMI (60.3 vs. 56.4 in Apr)
  • This month's Chicago Business BarometerTM found supply chain disruptions to have worsened in May with offshore sourcing the key driver. bi-monthly special question of whether firms were seeing easing up in supply blockages found the majority of respondents were not seeing any easing of supply chain disruptions (61.7%), followed by just under a third experiencing some easing (31.9%).
  • US 10Y technicals w/ TYU2 trading 119-08 (-28.5): gains considered corrective, primary trend direction remains down. Initial firm support to watch is 118-01+, May 18 low. Key support and the bear trigger is 116-21, May 9 low.
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