Very Modest Bull Flattening To Start The Week

Several factors resulted in a risk-off feel at the start of the new trading week: General worry surrounding the deepening of COVID impact/fear across several Asia-Pac economies/nations, most notably Australia. The first point allowed equities to extend lower, building on Friday's negative lead from Wall St. U.S. T-Note futures have breached last week's high, with broader volume in the contract running comfortably above average for this time of day. Lower oil prices in the wake of the latest OPEC+ agreement, which will see the group lift crude output by 400K bpd/month from August with several parties to the deal set to receive new baselines during '22 (although the length of the pact has been extended).

• T-Notes have eased from best levels after several pockets of buying supported the space in early Asia-Pac hours. The contract last deals +0-05+ at 133-30+ on volume of ~150K. Cash Tsys trade little changed to ~1.5bp richer on the day, with light bull flattening in play.
• A reminder that T-Notes went out at best levels of the day on Friday, while cash Tsys across the curve finished the final session of last week at virtually unchanged levels, unwinding some very modest cheapening during NY trade. Weakness in equities and receiver flows in the swap space (long dated swap spreads tightening again in the wake of earnings releases from some of the major U.S. financials) provided support as we moved through the NY session. Local data was mixed, with retail sales firmer than expected while UoM sentiment missed (with the 1-Year ahead inflation expectations component moving to the highest level witnessed since '08). Volume was generally subdued based on futures metrics and commentary from cash desks.
• President Biden will give remarks on the economic recovery at 11:30 ET (16:30 London).