Incrementally Richer In Asia

Russia-Ukraine standoff worry applied a very modest bid to U.S. Tsys overnight. Social media circulation of images re: the Russian troop movements flagged on Monday (into an “attack formation”), coupled with some commentary from various U.S. military watchers, seems to have applied very modest pressure to e-minis in recent trade. Still, there didn’t seem to be much new information in the tweets. We also saw the U.S. State Department issue travel warnings/guidance to leave re: the likes of Belarus & Moldova overnight, which applied light pressure to broader sentiment. Still the overall bid was modest, and at least partially tempered by the PBoC’s move to leave the interest rate applied to its MLF operations steady (although this was consensus, 11 of the 27 surveyed by BBG looked for some form of cut). TYH2 +0-05+ at 126-05 as a result (sticking within a 0-05+ range in Asia), with cash Tsys running 1-2bp richer. On the flow side, it was a TU block buyer (+5K) that headlined in Asia.

• To recap, the lack of outright escalation re: the Russia-Ukraine situation allowed Tsys to cheapen on Monday. Momentum was aided by what appeared to be a bit of a staged television address by Russian President Putin & Foreign Minister Lavrov, with the two agreeing on the need for continued diplomatic talks with the west re: the situation. It wasn’t all one-way trade, with an apparent dose of sarcasm from the Ukrainian President (a former comedian) re: the prospect of a Russian invasion on Wednesday briefly supporting core FI markets. This also came at a time when reports were doing the rounds re: the movement of Russian military vehicles into an attack formation. Fedspeak saw ’22 voter Bullard reiterate his hawkish communique from last week. Meanwhile, fellow ’22 voter, Kansas City Fed President George, told the WSJ that the central bank should consider selling bonds from its $9 trillion asset portfolio to address high inflation and guard against harmful effects that can result from raising short-term rates above long-term rates. Ultimately, cash Tsys were 5.0-7.5bp cheaper across the curve at the bell, with 2s leading the way lower as the curve bear flattened.
• NY hours will see the release of U.S. PPI data and the Empire Manufacturing print.