Frontend US Treasuries got some modest reprieve amidst a sizable miss in NFP data. To be fair, the negative print (-23k) was eye catching as was the negative revision of 103k over the preceding two months. With these data in mind, NFP averaged 20k over the past three months. 20k may be close to the current breakeven rate of net job creation without causing the unemployment rate to rise. Barring any other sizable revisions going forward, job creation is not outsized, and investors are not going to put too much weight on the decline in unemployment rate to 4.1% (given that the fall in participation rate was the key driver).
Attention will shift to inflation data due Wednesday. Consensus expects relatively muted prints of 0.1% and 0.2% MoM sa for CPI and core CPI respectively. Worries over energy-driven price pressures have receded with WTI prices hovering below USD 90 / bbl despite no clear resolution to the US-Iran conflict. Moreover, we note that US gasoline prices only climbed modestly through July. In short, energy prices are not going to be the key driver of overall price changes. Second-round effects would be more critical to watch.
An in-line CPI print would probably prompt Fed hike bets to further recede. The odds of a September hike has already fallen close to 50% and this could fall closer to zero if CPI does not surprise on the upside. Timing wise, market participants would likely be reluctant to make October’s FOMC tightening a base case given the proximity to the US mid-term elections. In which case, firmer bets on tightening would likely linger only for December’s FOMC meeting. That said, UST yields have been buoyant across the different tenors. We suspect that this could be due in part to the sizable US corporate bond issuance thus far this year (about USD 1.6tn). 
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