A Little Flatter On Wednesday

T-Notes +0-01 at 133-15+ at the re-open, dealing around late NY levels after finishing shy of their early NY peak on Wednesday.

• The cash Tsy curve saw some light bull flattening, with 2s little changed come the close, while the longer end of the curve richened by ~2.0bp on the day.
• A big miss in the headline ADP employment print allowed the space to firm, triggering the usual short-term correlation debates re: ADP & NFPs ahead of the monthly labour market report, due to be released on Friday.
• An unexpected, albeit modest, uptick in the headline rate of expansion in the latest ISM m'fing survey (59.9) was seen as we moved through NY dealing. A subsequent MNI interview with the ISM Chair saw suggestions that the international supply chain crunch now looks likely to persist well into next year and could linger for years as the surging Delta variant clogs ports critical to global trade and forces factory shutdowns in parts of Asia.
• The stronger than expected headline ISM print, an uptick in equities and early signs of a potential crest in U.S. COVID cases tempered the early Tsy bid as we moved through NY dealing, although equities faded, with the major indices dealing either side of unchanged at the bell.
• A pick-up in swappable corporate issuance ($7.25bn) generated some hedging flow, as did put trade in the options space.
• There isn't much in the way of tier 1 risk slated for Asia-Pac hours, while weekly jobless claims data, challenger job cuts and final durable goods data will hit during NY hours. Elsewhere, we will hear from Fed's Bostic & Daly, while the Tsy will make its mid-month supply announcement.