Ukrainian Advance, ECB Speak & Double Supply Apply Light Pressure

Tsys have cheapened a little as we head towards European hours, with setup for today’s double 3- & 10-Year Tsy auction schedule, Ukraine regaining ground that had been lost to Russia, a weekend RTRS sources piece which suggested that “policymakers see a rising risk that they will have to raise their key interest rate to 2% or more to curb record-high inflation” and hawkish weekend communique from Bundesbank chief Nagel seemingly in the driving seat, resulting in some light cheapening in Asian hours.

• TYZ2 trades just above the base of its 0-08+ overnight range after printing through its Friday base, last -0-03+ at 115-20 on a sub-par ~45K lots, while cash Tsys run 1.0-2.5bp cheaper across the curve, with the 7- to 10-Year zone leading the weakness.
• Holidays in Hong Kong, China & South Korea limited wider market liquidity during Asia hours.
• UK economic activity data & ECB speak from de Guindos & Schnabel will provide some interest ahead of NY hours.
• The aforementioned double Tsy auction schedule provides the highlight of Monday’s NY calendar, although focus is squarely on Tuesday’s CPI print, with the Fed now in pre-FOMC blackout and a 75bp rate at this month’s meeting hike pretty much seen as a done deal (~72bp of tightening is priced into FOMC Sep dated OIS, with a terminal rate of just over 4% now priced into the OIS strip, after the latter moved higher in the wake of Friday’s Fedspeak).