US TSYS: Net Losses On Israel-Iran Strikes, Bearish Theme Reinforced

Treasuries are off overnight lows but still see net losses on strong increases for crude oil futures on Israel and Iran trading missile attacks, in moves that on net build on the significant hawkish impulse from Friday's strong payrolls report. Much of the paring came earlier but it has since been supported by President Trump recently saying Israel and Iran are looking to do an immediate ceasefire. Expect geopol headlines to remain in focus, especially with a particularly light docket today, but with scope for US data to become more important again with Wednesday’s CPI report. 

• Cash yields are 1.3-2.2bp higher on the day, with increases led by 7s.
• The 30Y yield is currently at 5.016% off an earlier high of 5.033%, still close to the next notable resistance at 5.05%. A clear break through would open to 5.10% followed by 5.15%. The latter was the Head & Shoulder formation after the 30% Yield was capped at the 5.20% Psychological level on the 20th May. Today’s futures equivalent levels: 5.05% = 110.31, 5.10% = 110.11, 5.15% = 109.21 and 5.20% = 109.00.
• Curves at 38.8bp (2s10s) and 72.6bp (5s30s) have steepened from overnight lows but only back to levels seen after Friday's NFP report.
• TYU6 trades at 109-00 (-2+) on strong cumulative volumes nearing 600k, off an earlier low of 108-25.
• The latest move down reinforces a M/T bearish theme and also potentially provides an early signal that the corrective cycle that started May 19, is over.
• The bear trigger lies at 108-08+ (May 19 low), clearance of which would confirm a resumption of the downtrend. Alternatively, resistance to watch is 110-05+ (50-day EMA).
• Data: NY Fed consumer survey May (1100ET)
• Bill issuance: US Tsy $89B 13W & $77B 26W bill auctions (1130ET)
• Politics: Trump in tele-rally (1730ET, closed press), Trump attends NBA Finals (2030ET)