Firmer Into Europe, Aided By TYH1 Block Buy

T-Notes extend to best levels of the day into European hours, with several flurries of activity noted overnight. The contract sits 0-01+ off highs at 137-17+ as of typing, 0-00+ better off on the day. The early modest cheapening in the Tsy space unwound as we ground through Asia-Pac hours, aided by a 13K block buy of TYH1 at 137-17. A 2.5K block buyer of the USH1 171.00 calls was also seen overnight. Cash Tsys now sit unchanged to ~1.5bp richer across the curve, bull flattening, with headline flow on the light side in Asia-Pac hours. We should flag that Pfizer & BioNTech noted that the results of their studies indicate that their vaccine is effective against both the UK & South African variants of COVID-19.

• As a reminder, the cash Tsy curve saw some light bull flattening on Wednesday, with 30s going out the best part of 2.0bp firmer on the day. T-Notes were higher on the day come settlement, but shy of their intra-day peak, witnessed in early NY dealing, even with equities trading sharply lower. EU/AstraZeneca COVID-19 vaccine matters dominated headline flow ahead of NY hours, alongside speculation surrounding the potential for further ECB easing, before focus moved to the first FOMC decision of 2021.
• The Fed left its monetary policy settings unchanged. The central bank noted that "the pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic." On tapering, Chair Powell stressed that it is too soon for policy makers to start debating the timing of an eventual reduction in the central bank's bond buying.
• Q4 advance GDP, weekly jobless claims data and 7-Year supply headline locally on Thursday.