Softer Start

TYM2 opens on the defensive, with oil prices softening (likely on the back of weekend comments from the Iranian Foreign Minister who suggested that the country is close to reaching an accord with the U.S. re: restoring the 2015 nuclear pact). That has seemingly overpowered any influence from the Russia-Ukraine situation. The contract trades -0-09+ at 121-30, within the boundaries of Friday’s range.

• Note that a fresh round of Western sanctions on Russia is seemingly inbound, with the Russian pullback from around Kyiv resulting in some grim imagery, triggering fresh accusations of war crimes surrounding the deaths of Ukrainian civilians. Elsewhere, Russia has noted that talks with Ukraine had not progressed enough to facilitate a meeting between the Presidents of the countries and that the country’s position on the status of Crimea and Donbas remained unchanged. This came after a Ukrainian negotiator suggested that enough progress had been made for such a meeting to take place.
• Weekend Fedspeak saw NY Fed President Williams suggest that the Fed needs to move its policy settings towards a more neutral stance, but the pace at which it tightens will depend on the economic reaction. He also noted that the Fed could start trimming its B/S as soon as the next FOMC meeting, with inflation risks becoming "particularly acute." San Francisco Fed President Daly (’24 voter) acknowledged that the case for a 50bp rate hike in May had grown, while tipping her hat to multiple 50bp adjustments further down the line.
• To recap, Friday saw a generally solid to firm labour market report, even as headlined NFPs missed wider exp. (+431K vs. BBG median +490K), while the latest ISM m’fing print provided a miss (albeit still recording a healthy headline of 57.1 vs. BBG median 59.0), with the new orders sub-component missing (but still expanding), while the employment and prices paid sub-indices comfortably topped exp. The cash curve twist flattened on the day, with 2s and 3s cheapening by ~12bp, while 30s richened by ~2 bp, the only major benchmark to finish the session firmer. This allowed the inversion observed on the 2-/10-Year yield spread to deepen, while the 2-/30-Year yield spread inverted for the first time since ’07. 5+-Year paper finished off of worst levels, although a sizeable FV block sale (-21,577) helped keep the pressure on late in the day.
• There isn’t much in the way of meaningful releases slated for Asia-Pac hours, while a Chinese holiday will suck liquidity from the time zone. Looking ahead, durable goods & factory orders data will headline during NY hours.