Rates Paring Early Gains, Heavy Rate Lock Hedging

Tsys hold firmer by the close, but well off first-half highs, yield curves bull-flattening on wide ranges (2s10s -6.060 at -61.783; -64.324L, -50.971H)).

• Tsys broke narrow range in late overnight trade, largely tracking German bunds, particularly after latest German CPI reading for Dec: below exp (-0.8% MoM vs. -0.6% est, 8.6% YoY vs. 9.0% est).
• FI support eased after US S&P Global manufacturing PMI was unrevised in the final December reading at 46.2, leaving it down from 47.7 in Nov and the lowest since May'20.
• Coming ahead of tomorrow's ISM manufacturing survey, the confirmed decline in the PMI goes against the sizeable bounce in last week's MNI Chicago PMI from 37.2 to 44.9 (albeit clearly from weaker levels).
• Heavy corporate bond issuance helped keep rate rally in check amid rate lock hedging vs more than $30B debt issuance across the curve.
• Focus turns to Dec FOMC minutes release Wed at 1400, APD private employ data (150k est vs. 127k prior) on Thursday and headline NFP data (+200k est vs. +263k prior) Friday at 0830ET.