No Escalation Over The Weekend

TYH2 operates a touch below Friday’s late high, last +0-05+ at 126-18, trading in a 0-05 range at the re-open.

• To recap, U.S. worry surrounding the potential for a relatively imminent invasion of Ukraine by Russia supported Tsys in late Friday dealing, with the major benchmarks running 7.5-9.5bp richer come the close, as the 5- to 10-Year zone of the curve led the bid. Also helping the bid was confirmation that the Fed would taper QE purchases as expected, which removed fears re: the potential inter-meeting rate hikes.
• There has been little in the way of definitive movement in the Russia-Ukraine situation (summarised here), with no clear de-escalation apparent. Weekend commentary saw senior U.S. officials stick to the “window” and “any day” narrative re: the potential for a Russian invasion of Ukraine in the wake of a report which suggested that U.S. intelligence was looking for an invasion to come as soon as Wednesday. Note that U.S. President Biden has been invited to Ukraine, as the Ukrainian leadership believes that such a move would stabilise the situation.
• Elsewhere, weekend comments from San Francisco Fed President Daly once again played down the need for a 50bp hike in March (as per the MNI interview conducted on Thursday). She pointed to the need for lift off in March (given the “obvious need” to remove accommodation), coupled with a data-dependent stance thereafter, not committing to a view re: the number of hikes required in ‘22.
• There is a lack of tier 1 headline risks on the regional economic docket during Monday’s Asia-Pac session, with focus set to fall on the Russia-Ukraine dynamic and the BoJ’s unlimited 10-Year JGB buying operation. Looking ahead, Monday’s NY docket will be headlined by a television address from St. Louis Fed President Bullard (’22 voter, hawk). A reminder that Bullard pointed to the potential for an inter-meeting hike in the wake of Thursday’s CPI print, in addition to calling for 100bp of tightening by the start of July.