TYM2 Back From Late NY Highs

TYM2 edges back from late NY levels, last -0-02 at 127-12.

• To recap, U.S. Tsys were underpinned on Monday, with the Western weekend sanctions on Russia (and the fallout from the actions), a lack of progress in Monday’s Ukraine-Russia dialogue and continued fighting in Ukraine underpinning the space. Cash Tsys were 11-15bp richer on the day, with the 5- to 7-Year zone leading the way. A block buy in WNM2 (+2K) and month-end related rebalancing also seemed to generate a bid in the space during the NY afternoon.
• More granularly, we saw some pressure in USD-funding markets, with FRA/OIS wider and USD demand evident in the cross-currency basis space. This may have been driven by the latest note of caution from Credit Suisse’s Pozsar, who flagged the need for the banks to re-open USD swap lines in the wake of the Russia’s partial expulsion from the SWIFT messaging system. Still, pressures in that space eased as we moved through the day. STIR trade was headlined by block buyers in EDH2 & EDU2 (+50K apiece), with a block buy of EDM2 (+20K) also observed.
• Fedspeak saw Bostic (’24 voter) reiterate the need to move off of an emergency rate stance, with his current preference being for 25bp increment moves (although he stressed that the size of future hikes should be inflation dependent)
• Official PMI data out of China headlines the Asia-Pac docket today (the Caixin m’fing print is also due). Meanwhile, the latest RBA monetary policy decision should see no change in overall tone, nor monetary policy settings, although the Bank will likely tip its hat to the risks posed by the Russia-Ukraine conflict. NY hours will see the latest ISM m’fing survey headline, while Fedspeak will come via Mester (’22 voter) & Bostic (’24 voter).