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Cheaper Again, Will Asia Buy The Dip?

US TSYS

T-Notes operate around late NY levels, last dealing -0-01+ at 131-13+.

  • To recap, the space was subjected to further cheapening pressure on Tuesday, with the curve running steeper as 30s cheapened by ~9bp on the day. The space finished off of cheapest levels with 10s failing to test their mid-June highs in yield terms after various account types stepped in to fade the latest bout of cheapening during early NY hours.
  • Equities came under notable selling pressure on the uptick in yields, with tech leading the weakness.
  • Uncertainty surrounding the debt ceiling/government funding also remained in the mix with Republicans and Democrats still at loggerheads when it comes to avoiding a looming government shutdown.
  • 7-Year supply helped soothe the nerves a little, with the bidding metrics on the solid side (modest downtick to sub-average levels in cover, with dealer takedown holding below the recent average), even as the sale tailed by 0.8bp.
  • There is a lack of tier 1 risk events slated for Asia-Pac hours, with focus likely to fall on the leadership race atop Japan's ruling LDP Party. Asia's reaction to the latest leg of the recent Tsy sell off will be eyed. Wednesday's NY docket will be headlined by a raft of Fedspeak.
  • We also flag that troubled Chinese property developer Evergrande has a $45.2mn coupon payment due on a US$ denominated offshore bond on Wednesday. A reminder that the company missed a similar payment last week, with both of the bonds benefitting from a 30-day grace period before default can be declared.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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