• Post US-payrolls US Treasury yields and Fed pricing are staying higher, especially as the worst of the Taiwan Strait crisis seems have passed (emphasis on seemed). A report by Bloomberg mentioned that Strait shipping is returning to normal even though Chinese military exercises around the island are continuing.
  • As part of the exercises in retaliation for US House Speaker Pelosi’s visit, the Chinese military did a mock attack/invasion of the island. Furthermore, Beijing announced a new series of exercises in the Bohai Sea and the Yellow Sea. So, the tremors from Pelosi’s visit are still very much there.
  • Post-payrolls Fed pricing for the year remains elevated, with close to 125bps of hikes fully priced in for the remainder of the year. Year-end pricing stands at 3.5 percent (rounded down). For the September FOMC a 75bps hike is basically fully priced in. That was 50bps pre-payrolls. The yield curve remains strongly inverted, with the 2y10y spread at minus 40bps. The 3-month/10-year spread is at nearly 30bps, though that spread will very likely invert strongly after the September FOMC, barring excessive moves in the 10-year.


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