TY Ticks Lower In Wake Of Daly Comments,

TYM3 nudges lower, printing -0-01 at 111-02, a little below Friday’s late session high. This comes after the weekend saw San Francisco Fed President Daly (non-voter) point to a willingness to do more re: rate hikes if it looks like inflation is accelerating (alongside an already apparent need to deploy further rate hikes and signalling re: higher for longer rate).

• Tsys rallied on Friday, with USD weakness also noted, as participants seemed to take some risk off the table ahead of this week’s docket. That left the major benchmarks 3-12bp richer come the bell, with flattening apparent on the curve.
• Two-way swings in oil and a firmer than expected ISM services survey (including a slightly slower rate of expansion in the prices paid component) saw the space away from richest levels during the NY morning, before demand kicked back in, allowing Tsys to re-richen and 7+-Year paper to go on to register fresh session bests. The 2-/10-Year curve has moved back towards cycle extremes when it comes to the levels of inversion registered.
• With a lack of tier 1 data on the docket in Asia-Pac hours it will likely be the assessment of China’s “around 5%” annual GDP growth target (which was at the more attainable end of the spectrum) and Daly’s comments that dominates during Monday’s regional session.
• Further out, factory orders and final durable goods readings will cross in NY hours. The highlights of the week include Fed Chair Powell’s semi-annual testimony to Congress (Tuesday & Wednesday) and Friday’s NFP print. Ahead of these events, the OIS strip is pricing 31bp of tightening for this month’s FOMC & a terminal rate of ~5.45%.