Futures Tight Overnight With Cash Closed Until London Hours

Core FI was better bid during Asia-Pac trade, although there was little in the way of headline flow to support the move. T-Notes +0-02+ at 135-13 heading into European hours, holding to 0-05 range overnight, with some looking to month-end extensions that are a shade above average, while there may have been a limited degree of spillover from the bid in Aussie bonds (although the potential for cross market plays vs. the U.S. would have limited any impulse from that source). Cash Tsys are closed until London hours owing to the observance of a Japanese holiday.

• As a reminder, the space softened on Monday, with bear steepening in play as 30s went out 4.0bp cheaper on the day, although T-Notes finished comfortably off of worst levels. Comments from ECB President Lagarde provided a brief reprieve from the reflation trade narrative during the early NY morning, as she noted that the central bank is "closely monitoring the evolution of longer-term nominal bond yields." A sizable TYH1 block buy also helped provide support during the NY morning. Still, the broader reflation narrative came back to the fore in the wake of Lagarde's comments with the space cheapening again, while volume was boosted by activity in the futures rolls, as desks pointed to fast money & prop a/c selling, in addition to deal and swap-tied hedging.
• Day 1 of Fed Chair Powell's testimony on the Hill headlines the local docket on Tuesday, with consumer confidence data and 2-Year Tsy supply also due.