Asia Sees A Further Uptick

Asia-Pac investors were happy to participate in an extension of Tuesday's late NY Tsy rally, building on the momentum that came from a strong 10-Year Tsy auction. Flow dominated in Asia-Pac hours, with pockets of TYH1 buying and a 750 lot block lift of USH1 helping support early on. Headline flow was relatively light, with the U.S. House of Reps set to vote on Trump's impeachment on Wednesday. In an interesting turn, some reports have suggested that Senate Majority Leader McConnell may vote in favour of impeaching President Trump. T-Notes last +0-04 at 136-16+, after some light selling was seen in that contract, while cash trade has seen some modest richening, although the early bull flattening has unwound, with the long end back from Asia extremes, allowing the belly to outperform. Eurodollar futures unchanged tpo +1.0 through the reds, with Z1/Z2 flattener flow seen overnight.

• As a reminder, Tuesday saw T-Notes go out at best levels as U.S. Tsys recovered from intraday cheaps in the wake of the aforementioned strong auction, with the recent concession facilitating strong demand. Tsys were unchanged to a little richer across the curve come the closing bell, with 10s representing the firmest point on the curve (richening by around 2.0bp). A large block buy of TYH1 futures aided the post-auction momentum. This came after a large block sale of ultra-bond futures helped add some extra pressure during the earlier sell off. In terms of auction specifics, 10-Year supply stopped through WI 0.8bp, while the cover nudged back above the recent averages and dealer takedown hit multi-month lows as direct participation moved higher. Tuesday's Fedspeak was in line with the central Fed narrative, with some of the more notable hawks within the Fed maintaining their support of the central Fed view. This comes after some recent comments from regional Fed Presidents touched on the potential for asset purchase tapering in the not too distant future.
• Local focus now moves to Wednesday's 30-Year Tsy supply, a raft of Fedspeak, as well as CPI and wage data. Matters on the Hill will also garner interest.