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A Touch Cheaper In Asia As E-Minis Gain

US TSYS

A greater sense of stability, which saw the Hang Seng briefly pare all of its early losses at one point, while e-minis extended their move away from Monday's lows, applied some light pressure to the U.S. Tsy space during overnight trade. That left T-Notes -0-04+ at 133-04 ahead of London dealing, while cash Tsys run little changed to 1.5bp cheaper across the curve, with 10s leading the way lower. There wasn't much in the way of notable market flow observed.

  • To recap, T-Notes went out a touch shy of best levels come the end of Monday's session. Cash Tsy trade saw bull flattening, with the longer end of the curve richening by ~5bp come the bell. Worry surrounding Chinese property developer Evergrande dominated on Monday, with equities trading lower as a result, providing further impetus to the resultant bid for the U.S. Tsy space. Longer dated swap spread tightening was observed, indicating that receiver side flows also aided the broader rally in rates. A reminder that the relatively opaque nature of the Evergrande situation, coupled with the sheer size of its debt, make the situation hard to assess, but a worry nonetheless. Several sell-side institutions have played down the chances of a Lehman-like event for China (after talk surrounding such an outcome in recent weeks), although they stress that any default/restructuring will need to be carefully managed. Equities moved off session lows, with Tsys back from intraday richest levels into the close.
  • 20-Year Tsy supply provides the focal point during Tuesday's NY session. Housing starts and building permits data will also cross in NY hours.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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