Richer Monday, But Fed's Waller Points To Potential Taper Call In Sep

T-Notes operate a little shy of Monday's late NY levels after pulling back from their peak during the NY afternoon, to last trade -0-03 at 134-29. Initial resistance in the form of the July 20 high/bull trigger (135-07) wasn't tested on Monday.

• The Asia-Pac richening surrounding the prospects of further Chinese policy loosening & softer than expected manufacturing PMIs from the country extended, with the longer end of the curve driving the move, richening by ~5.0bp come the bell. Geopolitical fears surrounding both Iran & Russia fed into the bid, with a slower than expected rate of expansion in the headline U.S. m'fing ISM reading also noted (first sub-60.0 reading since January).
• Late in the NY day Fed Governor Waller noted that if July & August see headline NFP numbers similar to June's ~850K then that would constitute "substantial progress" which could result in a taper "announcement in September." If the next two jobs reports aren't as strong as June's then Waller conceded that "you're probably going to have to push things back a couple months." He went on to note that in his view "with tapering we should go early and go fast in order to make sure we're in position to rate rates in 2022 if we have to…I'm not saying we would, but if we wanted to, we need to have some policy space by the end of the year." The comments place increased focus on Fed Vice Chair Clarida's next address, scheduled for Wednesday.
• Elsewhere the Tsy marked its Q3 net borrowing estimate lower, pencilling in $673bn, down $148bn from the May estimate.
• 2x FV block sales headlined on the flow side, first 7.0K contracts were sold (~$359K DV01 equivalent), which was followed up by a 5.0K block seller (~$256K DV01 equivalent).
• The latest RBA monetary policy decision will headline during Asia-Pac hours. Meanwhile, factory orders and final durable goods data will hit during Tuesday's NY session, while Fed Governor Bowman will give welcoming remarks at a Fed conference on low-income & marginalised workers.