TYM2 Just Above Friday’s Late Lows

TYM2 operating just above Friday’s late NY lows, -0-04+ at 117-21, with focus on well-defined geopolitical tensions (continued sanction pressure on Russia from Western powers) and worry re: the Chinese labour market after Chinese Premier Li Issued a weekend warning re: a “complicated and grave” employment situation surrounding the recent COVID-19 outbreak in the country.

• To recap, the cash Tsy curve ran steeper on Friday, with some light richening seen after a mixed NFPs report (modest beat on headline NFPs, while AHE provided a 0.1ppt miss in M/M terms), before cheapening kicked back in. That left the major cash Tsy benchmarks 3-11bp cheaper on the day, with the weakness continuing into the bell as the long end dragged the space lower during the NY afternoon.
• Fedspeak had little impact on rate hike premium, with OIS trade relatively contained, moving in line with wider Tsy price action.
• In terms of Fedspeak, Minneapolis Fed President Kashkari (’23 voter) flagged the potential for a need to move rates into contractionary territory. Meanwhile, Richmond Fed President Barkin (’24 voter) told MNI that interest rate increases are not on a pre-set course and he would like to see interest rates on a path to normal that is as fast as feasible, not ruling out the potential for a supersized 75bp increase if needed. Post-market we saw St. Louis Fed President Bullard (’22 voter) and Governor Waller argue against the case that the Fed is behind the curve, while the former reiterated his view re: the need for the expeditious tightening of rates.
• A Hong Kong holiday will thin out wider liquidity in Asia-Pac hours, with Chinese trade data providing the major economic release during the timezone. Looking ahead, Monday’s NY docket is slim, with wholesale data due. More widely, participants will be on the lookout for any notable developments surrounding the Russia-Ukraine conflict, with President Putin set to speak during Russia’s annual Victory Day parade.