Light Cheapening Overnight

TYZ2 deals -0-04 at 109-28, operating 0-02 off the base of its narrow 0-06 overnight range, on volume of ~86K. The contract has registered a fresh cycle low, with the nearby 30 Nov ’07 low (109-23+) providing the next level of technical support for bears to target. Cash Tsys sit ~1bp cheaper across the curve.

• Tsys held a modest cheapening bias in Asia-Pac hours, as regional participants reacted to Wednesday’s sell off, registering fresh cycle highs for yields across the curve in the process.
• It wasn’t all one-way in flow terms, with softer than expected Australian headline job growth and a small block buy in WN futures (+750) helping to support the space at one point.
• Note that we also saw block sellers of TY futures (-1.5K & 01.4K) during Asia-Pac hours.
• Tsys have looked through a BBG source report which suggested that “Chinese officials are debating whether to reduce the amount of time people coming into the country must spend in mandatory quarantine.” Those headlines generated a light bid for oil, e-minis & the Chinese yuan, within broader risk-on flows, pulling e-minis away from worst levels of the day alongside a bid in Chinese & HK equities.
• Chicago Fed President Evans provided the now standard hawkish Fed rhetoric.
• Thursday’s NY docket will see the release of the latest Philly Fed survey, weekly jobless claims and existing home sales data. We will also get 5-Year TIPS supply and Fedpseak from Bowman, Jefferson, Cook & Harker.