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Bullish Extension


Heading North


(M1) Needle Still Points North


(N1) Bullish Conditions Remains Intact


Extends Lower With Bears In Charge

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T-Notes were happy to operate within the confines a 0-03+ range in Asia-Pac hours, last printing -0-01 at 132-12+, well within the boundaries of yesterday's range, with ~45K lots changing hands. E-minis have nudged higher, while EuroStoxx 50 futures are now ~0.9% above Tuesday's settlement levels. Cash Tsy markets are closed until London hours owing to the previously flagged Japanese holiday (with Japanese & Chinese markets set to return from their respective elongated weekends on Thursday). There has been little in the way of notable headline flow, with Minneapolis Fed President Kashkari (dove, non-voter in '21) sticking to his cautious script.

  • As a reminder U.S. Tsy Sec. (and ex-FOMC Chair) Yellen stole the headlines on Tuesday. Comments late in the day underlined the idea that she does not foresee an "inflation problem," but noted that if one were to appear then the Fed would address the matter. She also flagged transitory price pressures over the next "6 months or so." Yellen was keen to stress her strong belief in Fed independence and highlighted that she is not predicting/recommending a rate hike from the Fed. She also reiterated the idea that she expects full employment in '22. This came in the wake of her comments made earlier in NY hours re: the potential need for the Fed to hike rates if the economy overheats. We would suggest that those initial comments didn't provide anything new, having featured in Yellen's commentary in recent months e.g. the Fed has the tools to deal with inflation if it becomes an issue. The initial round of comments from Yellen saw the space back from richest levels of the day, after some early NY risk-off price action, which many struggled to frame with a narrative (some pointed to Chinese aircraft incursions into China's ADIZ, but this can't be considered a surprise given the recent run of such events). The early NY afternoon saw over 100K TYM1 change hands in a ~1-minute window, which provided a brief burst of support, although the move once again lacked an overt catalyst. An 8.4K block buy of TYM1 had helped the broader bid during the NY morning.
  • The quarterly refunding announcement from the Tsy, ISM services survey and monthly ADP employment reading headline locally on Wednesday. Elsewhere, Fedspeak from Mester, Evans & Rosengren is scheduled.