US$ Strength Saps Inflation Expectations

Still an inside range day when taking overnight levels into account -- Tsy futures that have been receding in the second half, well off midmorning highs and accelerating move late as equities claw off sharply lower levels (ESZ0 -67.0).

• No data or even headline driven, more likely technical as accounts look to pare back ahead better data releases Tuesday (existing home sales, Fed-speak).
• Tsys surged higher overnight on several factors: threat of second virus wave in Europe w/likelihood of lockdown return, global banks under pressure for $laundering accusation weighed on indexes. Surge in US$ (DXY implying lower inflation expectations underscored the move.
• Early trade included real$ buying long end and some sporadic spec buying of steepeners fading the move. Second half highlight in short end: over -50,000 Nov FF futures 99.925, took out the bid and went offered
• The 2-Yr yield is down 0.4bps at 0.1351%, 5-Yr is down 1.6bps at 0.2659%, 10-Yr is down 2.5bps at 0.6691%, and 30-Yr is down 2.8bps at 1.4252%.