Firmer Post-Biden, What Will Pass?

U.S. Tsys have rallied during Asia-Pac hours with the move extending further in the wake of U.S. President elect Biden's address re: his COVID support plan (which was initially outlined in the NY-Asia crossover). There was nothing in the way of surprises in the plan, allowing the extension of the early sell the rumour buy the fact theme. Now questions surrounding the prospect of the support package's passage through the Senate are at the fore i.e. will members of the more moderate Democratic wing support the scheme, if not it may be watered down. T-Notes last +0-06+ at 136-24+, a touch shy of best levels of the day and still within the confines of yesterday's range, while cash trade sees bull flattening, with 30s sitting a little over 3.0bp richer vs. the close. Flow was also supportive, with a 10.0k block buyer of the TYH1 137.50 and 138.00 calls, which appeared to be new bullish positions for the timezone, and smaller block buying of FVH1 futures (3x 2.0K or smaller clips).

• As a reminder, speculation surrounding President-elect Biden's stimulus plan ultimately pressured the space on Thursday. T-Notes went out around late lows, while the cash curve bear steepened as 30 cheapened by ~5.5bp come the bell. Thursday also saw Fed Chair Powell reaffirm the broader understanding of the AIT framework, while he noted that the Fed will not hike rates just to ward off theoretical inflation threats. He also stated that the central bank would "of course be very, very transparent" and flag any potential tapering of their asset purchase programs well in advance, while stressing that now is not the time for taper discussions and that the Fed does not want to exit asset purchases "too early." Tsys had seen some early support on the back of strength in Bunds which was linked to the political issues seen in Italy.
• A raft of local data and Fedspeak from Kashkari headlines locally on Friday.