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Short End Weaker As Cash Trade Gets Underway

US BONDS

The cash Treasury curve has bear flattened to open the week, with futures-implied Fed hike expectations marginally higher ahead of Wednesday's expected 75bp funds rate increase.

  • The short-end is underperforming, with cash 2-Yr yields hitting a fresh cycle high of 3.9252% - last up 5bps at 3.9167%, 5-Yr is up 4.6bps at 3.677%, 10-Yr is up 4.1bps at 3.4905%, and 30-Yr is up 3.1bps at 3.5441%.
  • Note, cash trading has only just gotten underway, with the UK and Japan observing holidays.
  • While hike pricing for the Sep FOMC has edged up only slightly, overall the eurodollar strip has mostly retraced Friday's UMich Inflation expectations-led rally - Dec22 EDs back at 95.41, off 6 ticks vs Friday's close; Dec23 off 8 ticks but still showing some inversion at 95.76.
  • Dec22 TY futures are trading near the 114-12+ low, a couple of ticks above Friday's 114-10+ low. Key support is at 114-06, the June 14 low.
  • A fairly light schedule includes NAHB homebuilder sentiment at 1000ET as the only data release, and 3-/6-month bill sales at 1130ET.
  • Focus is on central bank decisions the rest of the week. The Fed is of course on Wednesday (MNI's preview will be out later today), BOJ and BOE on Thursday among others.
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