Asian Players Use Recent Richening To Initiate TYZ0 Downside Plays

After a flurry of headlines in the NY/Asia-Pac crossover, covering everything from probable lockdown measures in Germany and France to the flagging of a Wednesday briefing from the FBI & U.S. DoJ on security matters surrounding China, headline flow cooled. T-Notes stuck to a 0-03+ range, last +0-01 at 138-28, with cash yields sitting little changed across the curve. Market flow provided the highlight overnight, with downside expressions noted via block trades in both the TYZ0 137.50 and 137.00 puts. That theme spilled over into screen flow, which saw the following package trade: TYZ0 138.50/137.50 put spread vs 139.50 calls, receiving 3 ticks credit on the package (buying the put spread), with 4.0K trading (-54% Delta).

• To recap, the Tsy space flattened again on Tuesday, with familiar themes i.e. the lack of a forthcoming U.S. fiscal pact and the European COVID-19 situation front and centre. This bull flattening saw cash 30s close ~4.0bp richer, with the space going out at richest levels of the day on the aforementioned European lockdown headlines. The latest 2-Year Note offering from the Treasury was solid, coming in virtually on the screws, while the cover ratio was steady vs. prev., but a touch shy of the recent average. Dealer takedown metrics were in line with the recent averages.
• Eurodollar futures sit unchanged to +1.0 through reds, with flattening flows seen in EDZ2/Z4 during Asia-Pac hours, as well as a round of EDZ0 lifts.
• 5-Year Note & 2-Year FRN supply is due today.