Better Bid

TYZ1 moved higher in Asia, last +0-08 at 130-01, but the contract has just pulled back from best levels (130-03+). The spill over from the latest RBNZ monetary policy decision supported the space (the widely expected 25bp OCR hike was delivered, although markets had priced in a ~34% chance of a 50bp hike), while desks flagged demand out of Japan as participants reacted to the recent Tsy cheapening as Tokyo returned from Tuesday's holiday. Cash Tsys run 2.5-3.5bp richer across the curve as a result, with 7s leading the bid. A 5K block sale of TYZ1 129.50 putts headlined on the flow side, while screen interest in upside EDZ4 exposure via 3EZ1 98.375/98.625 & 3EZ1 98.50/99.00 call spread buying was observed. Futures roll activity supported broader volume.

• To recap, the cash Tsy curve twist steepened on Tuesday, as 2s finished incrementally richer on the day, while 30s cheapened by ~6bp. Hawkish rhetoric re: tapering from Atlanta Fed President Bostic & stronger than expected Eurozone PMI data provided the pre-NY cheapening impetus. 7-Year Tsy supply was well received (going against some expectations), stopping through by 1bp, with the cover ratio moving to a YtD high (for 7s), while dealer takedown was a touch higher vs. the prev. auction, but held below the recent average. Note that intermittent technical difficulties resulted in the NY Fed postponing Tuesday's purchase operation, which would have covered $1.075B of 7.5- to 30-Year TIPS. Broader volume was supported by ongoing futures roll activity. Flow was headlined by a block buy in UXY futures (+5,466), which seemed to represent profit taking from a short position entered last week, while TU futures block buys (+7K & +9K) helped support the front end of the curve.
• NY hours will see the release of the minutes from the FOMC's most recent monetary policy decision, the PCE suite, weekly jobless claims data, the second GDP estimate for Q3, durable goods data and new home sales, as well as the final UoM sentiment reading for Nov.