Cheaper In Asia

Broader flows were at the fore overnight, with little in the way of meaningful headline flow observed. Core fixed income markets initially showed lower on spill over from the weakness in U.S. Tsys during Tuesday's session, before stabilising as the Nikkei 225 and e-minis moved into negative territory, reversing early gains. The space then moved lower again as U.S. 10-Year yields registered a fresh multi-month high. The U.S. & Chinese Presidents agreed to stick by the Taiwan agreement, which may have provided some incremental pressure earlier in the day.

• That leaves T-Notes -0-08 at 131-15+, 0-01+ off lows, with the cash Tsy curve bear steepening as 30s cheapened by the best part of 5bp on the day. A 5K block buyer of USX1 157.50 puts headlined during Asia-Pac hours.
• The combination of widening U.S. breakevens (aided by surging energy prices) and a move higher in U.S. equities pressured the U.S. Tsy space on Tuesday, resulting in bear steepening of the cash Tsy curve. 2s finished the session 0.5 cheaper on the day, while 30-Year yields rose by ~5bp come the bell. The space finished just off worst levels of the day. The early NY afternoon saw a 5,958 lot block buyer of USZ1 futures (~$1.1mn DV01), which represented the standout flow of the day and helped the space to base.
• Wednesday's U.S. docket is dominated by the latest ADP employment report.