TYU2 Operates Around Late Friday Levels

TYU2 is marginally above late Friday levels, dealing +0-00+ at 117-11+, after briefly nudging higher at the re-open. Weekend news flow was dominated by the G7 gathering and continued deliberations re: the potential for a price cap on Russian oil. Note that the G7 has decided to ban imports of Russian gold.

• TYU2 finished just of worst levels of the day come the end of the final session of last week, as cash Tsys cheapened by 3-6bp across the curve. The space came under some pressure on the back of a strong rally in equity markets (the S&P 500 added over 2.5%), with the early bid in equities further aided by the 5- to 10-Year inflation expectations reading within the final UoM sentiment print for June, chich pulled back to 3.1% vs. the 3.3% seen in the flash survey. Note that Chair Powell had identified the flash reading as a key input into the Fed’s decision to implement a 75bp rate hike earlier this month.
• St. Louis Fed President Bullard (’22 voter) continued to beat the drum re: front-loading rate hikes, while San Francisco Fed President Daly (’24 voter) noted that her base case looks for another 75bp rate hike in July. Just under 70bp of tightening is priced into the OIS strip come the end of the Fed’s July meeting, while a cumulative ~180bp of tightening is priced into the OIS strip when it comes to the period covering the December FOMC.
• The summary of accounts from the BoJ’s most recent monetary policy decision provide the most notable point of interest on the Asia-Pac economic docket on Monday. Meanwhile, the NY session will see the release of prelim. durable goods data, pending home sales, the latest Dallas Fed m’fing activity reading, in addition to 2- & 5-Year Tsy supply (owing to the holiday-shortened week).