It has been an orderly “risk on” trade start to the week, with dollar under minor pressure amid higher equities and lower fixed income. As of 8 AM ET, Treasuries were 2.75 to 3.25 bps higher in yield across the curve led by the belly, while equity futures point to a .5% gain on the open and dollar remains under pressure.

Treasuries started slightly firmer in Asia on some small buying of US 30s by US real money account and minor position squaring as USD traded firmer. However as week legitimately kicked off after Chinese open, a bid to the yuan and better risk sentiment resulted in Treasuries coming under pressure, as both Asian real money and central banks sold the belly of the Treasury curve, slightly more aggressively in 5y than 7y. What began as a fairly active session quickly lost its mojo and turned quiet in a largely sideways trade after Tokyo lunch. JGBs continue their firm performance as both real and anecdotal evidence supports idea of Japanese insurer buying to support long end of JGB curve. Aussie curve flattened again, as AUD funding again popped through 2% after last week’s quarter end reprieve had eased pressure for a few days. Risk sentiment held for the entire session as Chinese shares were up almost 3% while rest of Asia rallied between 1% and 1.5%.

After a very quiet open in Europe, risk on dominated again once traders became comfortable that Davis’ weekend resignation (if you want to read an ugly resignation statement, check out his over the weekend!) will be managed by PM May, thereby avoiding a crisis in confidence and allowing May to continue to oversee the Brexit. Treasury volume dried up, largely forced to follow moves in bunds and gilts. Macro accounts were better sellers of gilts early, but then sold bunds against TY; later in the European morning, RV account bought 10y OATs against bunds and then 5y OATs against bobls, as OATs were the early outperformer in peripheral space. Treasuries saw central bank selling of 5s as the dollar continued to trend slightly lower, European real money selling 2s, and RV active in 10s30s steepener on the swap curve. Gilts have seen consistent sellers across the client spectrum, mostly in 10y space, to lead the move lower into the US open. Data in Europe was limited to slightly stronger than expected trade numbers for Germany, while Nowotny comments have had little impact on market. DAX holding onto early gains barely, but rest of European bourses doing better.

Today’s US calendar brings only consumer credit at 3 PM ET, no speakers or events other than Trump’s pick for the Supreme Court at 9 PM ET tonight, and only 3m and 6m bills to be issued before monthly supply kicks off tomorrow. It’s going to be one of those summer days I fear….

Well, Friday was boring, so don’t want to guess what that means for today. With interest tepid at best and few outside drivers, this seems like a perfect day to back up the wagon with risk to a slightly outsized move. COT data released Friday will be of little help; not much changed in the week leading up to July 4th, so accounts still sport a small short in the long end but nothing to do handstands over. Against this backdrop, for choice today in TYU call the range 120-08+ to 119-29, although that may be a bit of a stretch here. Probably should be content with a 120-01/120-00 trade, but something just seems right to let dealers back up the truck before supply and give levered accounts a chance to get short before yet another squeeze. Take out 119-29 and it gets real interesting down around 119-22+. On the flipside, if somebody gets out of line, taking out 120-08+ opens 120-12+ ahead of 120-14 and then 120-26. That would be very painful….

All right, enjoy your Monday and try to stay awake,

mjc