Cash Closed In Tokyo, Eyes On Fed & Supply Matters

T-Notes unchanged after a tight re-open, last printing at 138-16. This comes after the contract recovered from worst levels of the day during Friday's NY session, but went out shy of best levels, within a narrow range, on light volume.

• To recap, long end outperformance was the name of the game on Friday, as the curve twist flattened, with some focus on the heightened potential for the Fed to alter its monetary policy easing methods before year end in the wake of the Treasury's request for the Fed to return unused funds from its support schemes (which was ultimately granted after the Fed voiced its displeasure at the move late on Thursday). Fed's Evans noted that "we are in a pretty good place at the moment to see how everything is going to play out…We obviously could do more with enhanced asset purchasing." He stressed that the methods that have already been adopted by the Fed provide "a tremendous amount" of support to the economy, although reiterated that the program could be further enhanced, if needed. This could take the form of extending the maturity of asset purchases/buying more, although he suggested that that Spring would provide a better idea of what was required.
• A TY/WN steepener provided some counter to the broader flattening impetus.
• Japan observes a holiday on Monday, so cash Tsys will remain closed until London hours. There is nothing in the way of tier one risk events slated for Asia-Pac hours. NY hours will bring the flash PMI readings, in addition to Chicago Fed activity data. A heavy supply schedule will see the Tsy auction 3-Month, 6-Month, 2-Year & 5-Year paper on Monday, while Fedspeak will come from Evans, Daly & Barkin.