A Calmer Tuesday

T-Notes +0-01 at 131-12+, hovering around late NY levels after going out near best levels of the day on Tuesday, as the contract stuck within the confines of Monday's range.

• The 3- to 5-Year sector of the curve led the rally, richening by ~3.5bp come the close. The long end saw some modest underperformance after struggling during the NY morning.
• Fedspeak from Chair Powell & NY Fed President Williams offered little new, bringing a more neutral to dovish tinge back to the fore after last week's hawkish FOMC read. Meanwhile, San Francisco Fed President Daly ('21 voter) suggested that conditions re: tapering may be in place in late '21/early '22, while playing down the need to discuss benchmark interest rate moves at present. Elsewhere, Cleveland Fed President Mester ('22 voter) stressed the Fed is not in a place where it needs to dial back accommodation, while pointing to September as a time when the Fed may have more clarity re: the attainment of its goals.
• The latest round of 2-Year supply generated a 0.5bp tail, with dealer takedown moving higher, back in line with the recent average, while the cover ratio nudged lower, once again moving in line with its own recent average.
• J.P.Morgan's latest weekly client survey showed its "fewest net shorts in a month, though the survey shows positions remain somewhat widely held." A reminder that this survey only covers the direction of client positioning, not the size.
• STIR flow dominated on the day and was headlined by a 100K screen seller of EDH1.
• Flash PMIs will likely set the tone ahead of NY hours on Wednesday (with a particular focus on the Eurozone and UK releases). Fedspeak and 5-Year Tsy supply headlines the domestic docket in NY hours.