What to watch

The rally in core fixed income towards the European close saw a renewed leg higher for Treasuries around 19:00-20:00GMT last night. This latter UST rally and some of the original rally in European FI has been faded by Asian market participants. This is partly on the back of some of yesterday's moves being exaggerated by month-end flows and also on better than expected Chinese PMIs.

• Despite moving a little off of the highs, the rally in STIR has shown more sustained movement. There is now around 137bp priced in of hikes for the Fed this year, down from around 160bp on Friday. The ISM manufacturing (particularly the inflation and employment components) will be closely watched today with Chair Powell due to deliver his tertimony to the Senate and House tomorrow and Thursday.
• Euribor futures will also be in focus today with final manufacturing PMIs due for release (alongside the first prints for Italy and Spain), German regional inflation through the morning (and national print due later) and Italian inflation also due for release today. Note that yesterday sources told the MNI policy team that even among the hawks there was little appetite for an ECB hike this year following the events in Ukraine. See the full piece here. We still think that markets will pay close attention to European inflation prints in particular.
• Also on the docket today will be speeches from Fed's Bostic & Mester, BoE's Mann & Saunders and Norges Bank's Bache.
• However, it will continue to be events in Russia/Ukraine which are the key drivers for markets, despite a busy day of data/speakers.