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Biden Bid? Tsys Grind Higher Even As Stocks Make New Highs

US TSYS SUMMARY

Rates reversed early losses, finished near modest session highs Wednesday, even as equities climbed to new all-time highs, ESH1 3850.0. Relative modest volumes and quiet trade as markets preoccupied with President Biden/VP Harris inauguration, a seemingly all-day affair that started with Pres Trump's early WH exit.

  • Decent volumes on two-way trade in the first half gave way to better buying in the lead up to the US Tsy 20Y Bond auction re-re-open, long end extending session highs briefly. Pick-up in corp debt issuance, return of domestic banks generated two-way hedging.
  • Rates gapped lower after weak auction: US Tsy $24B 20Y bond auction re-re-open (912810ST6) tailed 1.2bp: high yield of 1.657% (1.470% last month) vs. 1.645% WI, on a bid/cover 2.28% (2.39% previous).
  • Heavy second half selling in Eurodollar lead quarterly futures -60k EDH1 at 99.81(-0.005); Block: 10,000 Green packs (EDH3-EDZ3), -0.0075 at 0914:10ET, paper focus on sector since late 2020. 10k Old Red packs (EDZ2-EDU3) blocked last Friday while option accounts have been building large rate hike insurance positions via buying puts
  • The 2-Yr yield is down 0.4bps at 0.127%, 5-Yr is up 0.2bps at 0.447%, 10-Yr is down 0.2bps at 1.087%, and 30-Yr is up 0.5bps at 1.8388%.
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