Latest Dip Bought In Asia

Dip buying has kicked into U.S. Tsys after some initial weakness in early Asia-Pac trade, with Chinese equity markets on the defensive as concerns surrounding the well-documented headwinds for Chinese economic activity weigh on mainland and Hong Kong equity indices ahead of the week-long Chinese holiday, which gets underway on Friday. The earlier disclosed liquidation of some of Evergrande's private shareholdings is providing a relief rally for the name, although questions remain whether the move will provide much in the way of meaningful medium-term reprieve for the firm (as we discussed earlier). T-Notes last +0-02+ at 131-17+, a little shy of their peak, running on ~185K volume. Cash Tsys now sit little changed to ~1.5bp richer across the curve, with the belly leading the rally.

• To recap, the Tsys were subjected to further cheapening pressure on Tuesday, with the curve running steeper as 30s cheapened by ~9bp on the day. The space finished off of cheapest levels with 10s failing to test their mid-June highs in yield terms after various account types stepped in to fade the latest bout of cheapening during early NY hours. Equities came under notable selling pressure on the uptick in yields, with tech leading the weakness. Uncertainty surrounding the debt ceiling/government funding also remained in the mix with Republicans and Democrats still at loggerheads when it comes to avoiding a looming government shutdown. 7-Year supply helped soothe the nerves a little, with the bidding metrics on the solid side (modest downtick to sub-average levels in cover, with dealer takedown holding below the recent average), even as the sale tailed by 0.8bp.
• A raft of Fedspeak headlines Wednesday's NY docket.