Another Topsy Turvey Round Of Asia-Pac Trade

Core FI markets initially drew support from weekend developments surrounding the Russia-Ukraine situation, with continued warnings from the U.S. re: the threat of an imminent Russian invasion of Ukraine (which could target multiple cities if it materialises, according to BBG sources) and the now indefinite stay of Russian troops in Belarus front and centre. The broader risk picture then became more constructive as we learnt that U.S. President Biden and Russian President Putin have struck an agreement in-principle re: a meeting, although that is contingent on no Russian invasion of Ukraine (it would seem that Thursday’s Blinken-Lavrov meeting will be used to flesh out the details of the Presidential level talks). Still, core FI traded lower on the back of the Biden-Putin meeting news.

• TYH2 has been a little unwilling to probe meaningfully below neutral levels, with markets perhaps a little sceptical ahead of the Blinken-Lavrov meeting. TYH2 last dealing at 126-19+, -0-02 on the day, operating in a 126-18+ to 126-29+ range thus far, on over 145K lots. Note that the details of the White House read out re: the potential Biden-Putin meeting did not withdraw the idea that a Russian invasion of Ukraine is in the offing, which may have limited the downward impetus fleshed out above. A reminder that Cash Tsys will remain closed on Monday, while Tsy futures will be subjected to curtailed trading hours owing to the observance of the President’s Day holiday in the U.S.
• A quick reminder that Friday’s Asia-Pac session was headlined by news of the aforementioned Blnken-Lavrov meeting, which provided a risk-on feel into European trade. However, that faded as we worked through the day, with cash Tsys running little changed to ~5bp richer come the bell, bull flattening. Stories including the evacuation of women and children from the Donbas region, several notable explosions in Ukraine and the Biden administration’s continued assertions re: the likelihood of an impending Russian invasion of Ukraine helped to underpin the space during NY hours. Finally, Friday Fedspeak from the likes of Brainard, Williams & Evans continued to push back against the need for a 50bp rate hike at the March FOMC.