TY A Little Softer To Start The Week

TYU2 nudges lower to start the week, last dealing flat at 119-28+, unchanged vs. Friday’s settlement levels, while e-minis tick lower.

• Weekend headline flow was largely centred on Sino-U.S. tensions, with Taiwan continuing to provide the focal point there, as Chinese state media and western press (namely the FT) flagged an “unprecedentedly strong message from the Chinese side regarding US House Speaker Nancy Pelosi's planned visit to the island of Taiwan.” Elsewhere, Russian missile strikes on the Ukrainian port of Odesa hours after the Friday agreement to facilitate the passage of grain out of Ukraine provided another focal point.
• To recap, Friday saw the curve bull steepen, with the major benchmark Tsys running 7-15bp richer, as 3s outperformed, while the longer end lagged, facilitating some bull steepening of the broader curve (Tsys finished a little shy of best levels come the NY bell). Soft PMI data out of Europe provided the initial bid in pre-NY dealing, with a soft services PMI print out of the U.S. and the removal of Fed rate hike premium (a 75bp hike at this week’s FOMC is still fully priced, while the fed funds rate is currently priced to sit at ~3.35% come the end of the central bank’s December meeting, per FOMC dated OIS) and a downtick in equities adding to the rally as we worked through the session. Note that the weekend saw Tsy Sec. Yellen continue to point towards faith in the U.S. economy when it comes to the prospect of a recession, playing down any signs of such an economic development as she touted strength in the labour market.
• Monday’s Asia-Pac docket is particularly light. Further ahead, the NY calendar is headlined by regional Fed activity indices from Chicago & Dallas, along with 2-Year Tsy supply.