Softer At Re-Open

Tsy futures trade lower to start the week, TYH2 -0-04+ at 127-26+, pulling back from Friday’s late NY high. The previously outlined tweak to Goldman Sachs’ Fed call (now looking for 5x rate hikes in ’22 vs. 4x previously), coupled with reaction to the headlines generated from the previously outlined FT interview with Atlanta Fed President Bostic (the ’24 voter stuck to his call for 3 rate hikes in ’22, but alluded to the potential for more, if the data justified such a move) seem to be in the driving seat early this week.

• To recap, Tsys unwound Friday’s early losses as we worked through NY hours. Softer than expected employment cost index data and (the usual) dovish commentary from Minneapolis Fed President Kashkari (’23 voter) helped support the space. PCE data largely met exp.
• Fed rate hike premium saw a marginal unwind as we moved through the day, even with some notable sell-side names providing more aggressive Fed tightening calls.
• That left cash Tsys at the richest level of the day come the bell, with benchmark yields ~1.5-5.0bp lower on the day.
• The start of the Lunar New Year holiday period will thin out liquidity during Asia-Pac hours (with China providing the most notable absence on Monday). NY hours will see the release of the latest MNI Chicago PMI reading, in addition to the Dallas Fed manufacturing activity print. Meanwhile, Fedspeak will come from Kansas City Fed President George (’22 voter) & San Francisco Fed President Daly (’24 voter).