Asia Demand Evident

Regional demand for Tsys was firm in Asia-Pac hours, with T-Notes last +0-03+ at 138-10, a little off of highs, while cash Tsys bull flatten as 30s richen by ~1.6bp. Upbeat rhetoric from Chinese President Xi re: relationship building among APEC nations has done little to bolster broader risk appetite (Xi also continued to point to a focus on the dual circulation strategy), with Brexit worry and Five Eyes communique re: recent developments in Hong Kong dominating headline flow overnight. On the flow side there was a screen seller of TYF1 137.00 puts in Asia-Pac hours.

• Wednesday saw markets continue to assess the balance of the near term economic hit from broader/deeper social mobility restrictions in the U.S. vs. the hope surrounding positive vaccine developments, which are more of a medium term consideration for now (while questions remaining broader distribution remain evident). The latest 20-Year Tsy auction was soft, with a 0.9bp tail seen, marginal uptick in dealer takedown and dip in the cover ratio. The auction saw T-Notes move to intraday cheaps, before the closure of NYC schools saw a correction from lows into the close as equities sold off. The belly of the curve underperformed in cash trade. Roll activity supported broader volume.
• Eurodollar futures print unchanged to +0.5 through the reds, with EDZ1/H2 flattener flow providing the highlight overnight.
• Weekly jobless claims and Philly Fed activity data headline the local docket on Thursday, with the Treasury's end-of-month supply announcement and Fedspeak from Mester, Bostic & Rosengren also due.