LATAM: Mexico July Inflation Data, Brazil June Retail Sales

Little in the way of spill-over pressure for Bunds after the EU mandated banks for a tap of its Oct-52 line (some desks had outlined the likelihood of a long end tap, although we had no real conviction when it came to the maturity that would be issued via syndication this week). Bund futures move away from session cheaps to print -20, after failing to test Friday’s low, while wider German cash benchmarks sit 1-2bp cheaper. 10-Year Bund yields operate a little over 10bp off cycle highs. Broader macro headline flow has been somewhat light, leaving the previously outlined Chinese inflation data and cross-asset-derived moves at the fore.

• Cash Tsys hold a milder version of Friday’s twist steepening, leaving the major benchmarks running 3bp richer to 1.5bp cheaper, pivoting around 7s. The 2-/10-Year curve is off session highs of -84bps but holds a move through post-payrolls highs.
• Fedspeak headlines the docket after relatively few appearances last week, with VC Supervision Barr starting proceedings off before three ’24 voters. It might help frame the debate but focus is ultimately on Wednesday’s CPI release ahead of the Jul 26 FOMC decision in an increasingly data dependent world.
• 2YY -3.1bp at 4.915%, 5YY -3.0bp at 4.330%, 10YY +0.0bp at 4.062%, 30YY +1.1bp at 4.057%.
• TYU3 trades 2 ticks lower at 110-19+ just off session highs of 110-21+ but well within Friday’s range (with both high and lows seen after payrolls). The bear threat remains present with support at 110-05 (Jul 6 low), whilst volumes are on the low side at a cumulative 230k.
• Fedspeak: Barr (1000ET, text), Daly (1100ET, no text), Mester (1100ET, text), Bostic (1200ET, no text)
• Data: Wholesale trade sales/inventories May/May F (1000ET), Consumer credit (1500ET)
• Bill issuance: US Tsy $65B 13W, $58B 26W bill auctions (1130ET)

• In the FI space, Bund futures remain soft following last week’s extension lower. Price has cleared key support and the bear trigger at 132.12, the May 26 low. The clear break strengthens bearish conditions and confirms a resumption of the downtrend. This opens 130.46, the 1.236 projection of the Jun 1 - 16 - 27 price swing. Moving average studies are in bear-mode position, reinforcing bearish conditions. Initial firm resistance is at 132.18, the Jun 16 low.
• Gilt futures remain soft and last week’s break lower reinforces bearish conditions. The contract has cleared key support at 93.88, the Jun 20 low, to confirm a resumption of the downtrend and maintain the bearish price sequence of lower lows and lower highs. This signals scope for a move to 91.80 next,1.382 projection of the Jun 1 - 20 - 23 price swing (cont). On the upside, initial firm resistance is seen at 93.88. A break of this level is required to ease bearish pressure.