A Flat Re-Open After Monday’s Supply-Induced Weakness

TYZ2 deals around late NY levels, just off its Monday base, printing -0-01+ at 109-19.

• Cash Tsys were 5.5-7.5bp cheaper on Monday, with 30s providing the weakest point on the curve, while 2s were softer than the remainder of the major benchmarks, as the wings drove the weakness.
• A bounce in risk appetite, surrounding continued source reports re: the potential, albeit gradual, Chinese move away from the zero COVID strategy, and heavy corporate supply ahead of this week’s Tsy auction schedule, were two key reasons for the cheapening.
• Elsewhere, continued speculation surrounding the potential for a strong showing by the GOP in the mid-term elections was noted, while weakness in Gilts and Bunds added some cross-market pressure at different points of the London afternoon.
• A block buy of 8K TYZ2 110.00 calls (covered in futures) provided the flow highlight on Monday.
• There isn’t much in the way of tier 1 risk events slated for Tuesday’s Asia-Pac session, outside of any comments from Richmond Fed President Barkin (currently speaking on the topic of inflation). Meanwhile, Tuesday’s NY slate includes the release of NFIB small business optimism data, as well as 3-Year Tsy supply. Further out, the results from the mid-terms and the CPI print provide this week’s key domestic risk events.