Outperformance In The Belly On Monday

Cash Tsys were 10-22 bp richer across the curve on Monday, with the 5- to 7-Year zone leading.

• The UK fiscal u-turn re: tax relief for high earners, continued worry re: European banks and Asia’s willingness to fade Friday’s sharp round of weakness into month-/quarter-end fed into the bid pre-NY.
• A softer than expected ISM mf’ing survey then propelled the space higher through the early rounds of NY trade, before the details of the latest BoE Gilt buyback operation provided some weight, resulting in a pullback from firmest levels of the session.
• A notable block buy in FV futures (+19K) aided the post-ISM rally, while a block sale in UXY futures (-3.5K) helped the move away from best levels.
• NY Fed President Williams stressed that inflation is the number one problem for the Fed, while flagging a way to go when it comes to tightening, highlighting the median dot in the Sep for ’23 (ultimately sticking with the central Fed message).
• The latest RBA monetary policy decision headlines the Asia-Pac docket on Tuesday, although holidays in Hong Kong & China will limit wider liquidity during overnight trade.
• Tuesday’s NY docket will be headlined by final durable goods readings, JOLTS job opening data and Fedspeak from Jefferson, Williams, Mester, Logan & Daly