Post-Powell Extremes Hold In Asia, Fed Pricing Off Dovish Extremes

TYH4 last shows -0-07+ at 110-14, -0-02 off the base of its 0-15 session range.

• Cash Tsy yields are 2-7bp higher, as the curve bear flattens. 2s10s and 5s30s pull back from multi-week highs seen at the end of last week as a result.
• Note that futures and yields failed to move through Friday’s post-Powell extremes in Asia-Pac hours.
• Weakness in European bonds provides the impetus for a leg lower in Tsys, with the Asia-Pac cheapening extending.
• A mix of some yield support in BTPs and questions surrounding the viability of the central bank easing currently in for ’24 (along with the speed of the recent repricing) are cited by some as the early background cap for bonds on Monday.
• The closing of existing (crowded) longs was also a potential limiting factor.
• Conversely, some desks have flagged the risks of CTAs adding fresh longs owing to last week’s closing levels.
• Fed Funds futures now show ~16.5bp of cuts through March ’24, ~34bp of cuts through May ’24 and ~124bp of total cuts for ’24 on the whole. The latter sits more than 10bp off its post-Powell dovish extremes.