Underpinned Early On

Impulses from abroad have helped Tsy bulls in pre-NY trade, with softer-than-expected UK wage data allowing the late NY/Asia-Pac rally to develop a little further (spill over from JGBs supported overnight).

• That biases TYH4 back towards pre-NFP levels, although that data-inspired move lower hasn’t been fully retraced.
• The contract last shows +0-09 at 110-19+, 0-01+ off recently registered session highs operating in a 0-11+ range.
• Cash Tsy yields are 2-4bp lower across the curve, with a light flattening bias seen.
• A tick away from early session highs in gilt futures is helping cap the rally at present, although UK paper remains comfortably firmer.
• Note that previously flagged technical parameters remain in place, with Friday’s range generally intact thus far this week (save a brief look below the base on Monday).
• CPI data headlines the NY docket today. We have noted that the hawkish reaction to Friday’s payrolls report leaves more two-sided risk to Tuesday’s CPI, with a softer than expected print potentially opening scope for heighted volatility if the FOMC surprises on the hawkish side on Wednesday. See our full preview of the event here.
• Fed Funds futures show ~115bp of cuts through ’24 at typing, off recent dovish extremes (~135bp), but biased a little more dovishly over the last 12 hours or so given wider core global FI moves.
• 30-Year Tsy supply is also due, as is NFIB small business optimism data.