A Touch Firmer As North Korean Missile Test Helps Unwind Early Downtick

TYZ2 prints +0-02+ at 112-22+, 0-01 off the peak of its 0-08 overnight range, on volume of ~71K. Cash Tsys run flat to 1.5bp richer into London hours.

• A block buy in TY futures (+1,750) and news that the latest North Korean missile test resulted in an ICBM falling into Japanese waters (with no damage to Japanese assets reported) allowed the space to unwind the modest downtick that came in early Asia-Pac trade, after regional participants initially followed Thursday’s cheapen, albeit in a limited manner.
• The 2-/10-Year yield spread continues to hover within a couple of bp of the deepest levels of inversion witnessed during the current cycle (which printed on Thursday, in lieu of hawkish rhetoric from St. Louis Fed President Bullard).
• Outside of the aforementioned block buy of TY futures, Asia-Pac trade also saw some buying of the TYZ2 112.00/111.50 1x2 put spread on screen.
• Looking ahead, NY hours will bring existing home sales data and Fedspeak from Collins. We will also see a joint round of comments from President Biden & Tsy Sec Yellen.