T-Notes A Little Shy Of Late NY Levels In Holiday-Thinned Trade

T-Notes have traded either side of unchanged but haven't threatened to close the opening gap lower from Friday's late NY highs. As a reminder, cash Tsys are closed until NY hours owing to the observance of Japanese & UK holidays, which limited broader activity, with just over 50K T-Notes changing hands as of typing. The early dip, facilitated by a bid in e-minis, was perhaps countered by the move lower in the Hang Seng/e-minis pulling back from best levels. It is worth noting that the weekend saw U.S. Tsy Secretary Yellen again play down the inflationary impulse stemming from President Biden's fiscal support schemes, once again highlighting the idea that the Fed has the capability and tools to deal with those sort of issues if they develop. Elsewhere, Iran sent out positive overtures re: the U.S. lifting sanctions, although the U.S. was quick to note that a deal is yet to be struck.

• To recap, Friday saw T-Notes finish at best levels of the day, although it was a limited session in terms of the trading range observed, as the contract stuck comfortably with the confines of Thursday's range. Cash trade saw 5s outperform, richening by the best part of 2.0bp on the day, with yields a touch lower across the entirety of the curve. Dallas Fed President Kaplan (non-voter in '21) once again touched on the tapering discussion, reiterating his view that "at the earliest opportunity, I think it would be appropriate for us to start talking about adjusting those purchases." Elsewhere, former New York Fed President William Dudley told MNI that the Federal Reserve may need to raise interest rates to at least 3.5% and perhaps even above 4% because its new framework will generate lags in responding to inflation that require more aggressive tightening later. Domestic data generally printed in line to stronger vs. expectations.
• The m'fing ISM survey headlines the local U.S. docket on Monday. Elsewhere, Fed Chair Powell will speak, although the topic of "Community Development" may limit the scope for discussion surrounding the nuances of monetary policy.