At Lows Into European Hours

Pockets of selling in fairly recent trade have allowed T-Notes to push to fresh session lows, printing -0-13+ at 133-15 at typing (0-00+ off lows) on above average volume of ~155K. Cash Tsys run 1.0-5.0bp cheaper on the day, with bear steepening in play. There hasn't been much in the way of meaningful news flow during Asia-Pac hours. A 5.0K block sale of FVU1 (~$255K DV01 equivalent) helped the space lower not long after the Asia-Pac reopen, providing the most notable round of flow during the overnight session. Thursday's rally in the space has now been unwound, with some pointing to focus on Monday's "double supply" of 3- & 10-Year Notes as a potential catalyst, although others have noted that the recent positioning washouts may have run their course given the overstretched valuations in Tsys vs. their in house models.

• This comes after the contract finished well shy of its intraday peak on Thursday. Benchmark yields across the cash Tsy curve finished 1.0-4.0bp lower on Thursday, with the long end lagging the rally as the 3- to 5-Year zone outperformed. U.S. 10- & 30-Year yields extended on the recent move lower ahead of NY hours before pulling back from extremes, with the former failing to break below its 200-DMA, although the latter registered its second consecutive close below that particular technical barometer. Continued focus on positioning, increased worry re: COVID variants (at least in terms of case counts) in various pockets across the globe, pressure for equities and increased speculation surrounding monetary easing in China (with most pointing towards the increased likelihood of a targeted RRR cut in the wake of Wednesday's State Council meeting) all feeding the bid in early trade. Still, a move off lows for equity markets helped the Tsy space away from best levels of the day during NY trade. There was no real reaction to the latest round of weekly jobless claims data, which saw an unexpected uptick in initial claims, while continuing claims fell a little more than expected.
• Friday's domestic docket is relatively empty (wholesale inventories & sales data provides the only point of any note during NY hours).