Curve Twists Steeper On Tuesday

TYH2 a touch cheaper at the re-open, aided by the after-market bid in e-minis (which was driven by better than expected earnings from the likes of Alphabet & AMD)

• The bulk of the Tsy curve finished marginally cheaper on Tuesday, with equities in the ascendency, albeit still shy of all-time highs after the softening witnessed in January.
• Fedspeak from Bullard & Harker played down the need for a 50bp hike in March, with OIS now pricing ~29bp of tightening come the end of that particular FOMC gathering (vs. the 34bp of tightening observed at one point last week). This provided some support for the front end of the curve, with 2s going out ~1.5bp richer on the day. The remainder of the major benchmarks were little changed to 1.5bp cheaper on the day, with the bid in equities and firmer than expected prices paid data in the latest ISM m’fing survey helping apply pressure, unwinding the early bid.
• Flow of note included a TY/WN block flattener (-15,333/+3,500), US/WN block flattener (-3,000/+1,550), a block buy of TUH2 (+15,000) & block buy of FVH2 (+3,880).
• We also saw a profitable unwind of existing Eurodollar midcurve positioning, with over 80K of the 0EH2 98.625/98.500 put spread given throughout the session.
• The ongoing observance of the LNY holiday period will continue to limit liquidity in Asia. NY hours will see the latest ADP employment print, in addition to the release of the quarterly Tsy refunding announcement.