Asia Buys The Dip

Monday's sharp cheapening perhaps allowed regional Asia-Pac participants to adopt a buy the dip mentality, while the lack of a smooth transition trajectory on the back of the U.S. election is aiding that theme. T-Notes +0-08 at 137-26+ as a result, as e-minis tick lower, with the cash Tsy curve bull flattening, running unchanged to 3.2bp richer across the curve. T-Notes operate on strong volume, with over 200K lots changing hands thus far after the contract pulled back from the Asia-Pac high.

• To recap, COVID-19 vaccine developments added fresh pressure to the Tsy space on Monday, building on the early momentum surrounding Joe Biden's designation as President-elect, with the curve bear steepening, as 30s closed 11.0bp cheaper on the day. As a reminder, Pfizer's vaccine showed promising results, although some still pointed to unanswered questions re: safety and the scope for broader deployment after scouring through the small print. Block sales in the futures space helped add to the pressure, with 10- and 30-Year yields registering multi-month highs in the process, before backing off. The cash S&P 500 registered a fresh all-time high, before a sharp pullback into the close, which helped Tsys move away from worst levels. The latest 3-Year note auction from the U.S. Tsy stopped through WI by 0.3bp, with an in line with recent average cover ratio and a larger than average dealer takedown, as the internals provided a mixed picture re: the strength of the auction
• Eurodollar futures sit unchanged to +1.5 through the reds, and up to +4.5 vs. settlement in the golds. With a mix of EDZ1/Z2 & EDZ2/Z3 flatteners, EDM2/M3 steepeners and EDH2 lifts dominating on the flow side in Asia-Pac hours.
• The JOLTS job opening & NFIB small biz confidence readings are due today, with a full slate of Fedspeak also eyed. 10-Year Note issuance is also on deck ahead of Wednesday's Veterans Day holiday.