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Flatter Curves, Long End Bid Drivers

US TSY FUTURES
Long end rates holding just off recent session highs, 30YY back down to 1.9369% after rejecting move north of 2.0 late overnight (2.0041%H), first time since Feb 2020. No single factor at blame: trading desks initially cited US$/Yen reversal lent to short unwind/long end bid in early trade that helped spur steepener unwinds.
  • Long end bid momentum gained as support for equities faded amid chatter of portfolio allocation out of equities into bonds (a perennial excuse, favored reason sometimes given when nothing concrete available).
  • That said, insurance portfolio hedging risk via selling in long end rates and swaps had faded into last week's Treasury refunding.
  • Market has become more inured to Covid-related headline risk, more short-term, inter-day moves tied to vaccine efficacy and/or availability while mortality rates have moderated in developed countries.
  • Trump's impeachment trial Tuesday unlikely supporting factor in rates.
MNI Chicago Bureau | +1 312-431-0089 | bill.sokolis@marketnews.com