Oil Vol. A Key Driver On Monday, More Fedspeak & Auctions Eyed

TYZ2 operates marginally above late NY levels at the restart after ending Monday trade a touch above session lows.

• The curve flattening impetus extended on Monday, with the major benchmarks running 2bp cheaper to 3bp richer come the close, pivoting around 10s. The 2-/10-Year yield spread registered another cycle extreme, before ticking away from deepest levels of inversion.
• Volatility in the oil markets, aided by OPEC+ production adjustment rumours and subsequent denial of any such steps being eyed from some of the major Gulf producing nations was in the mix, which meant that crude settled marginally lower on the day after a pretty aggressive bounce from worst levels (Tsys traded inversely with crude around the headlines).
• Chinese COVID matters also played a part in the intraday vol. there, with breakevens being pulled around by swings in crude.
• Mixed results from Monday’s double Tsy supply (solid 2-Year auction, weaker 5-Year action) provided some movement in the front end of the curve.
• A flattening impulse on the UK Gilt curve aided the flattening in Tsys.
• A dinner time address from RBA Governor Lowe headlines Tuesday’s Asia-Pac docket. Further out, NY hours will see the release of the Richmond Fed m’fing survey, 7-Year Tsy & 2-Year FRN supply, as well as Fedspeak from Bullard, George & Mester.