Limited Asia Trade, Cash Closed On Japanese Hol

TYH2 stuck to a narrow 0-06 overnight, hampered by the closure of cash Tsy trade, owing to the observance of a Japanese holiday. The contract last deals unch. at 126-15. Gyrations in the ACGB space (with movements linked perceptions surrounding the RBA, in addition to a hawkish RBNZ decision) provided some lead for Tsys, but a lack of meaningful macro headline flow made for a contained session. The space looked through the cancellation of Thursday’s Blinken-Lavrov meeting, while the White House took a Biden-Putin meeting off the table (until there is a de-escalation re: Ukraine).

• Tuesday’s early risk-off impulse, stemming from Russia’s recognition of the LPR & DPR separatist regions in Ukraine, coupled with the official announcement of a Russian “peacekeeping” mission in the separatist states, faded as we moved through Tuesday trade. The lack of hardline western sanctions on Russia (at least for now) seemingly allowed markets to breathe a sigh of relief. The cash Tsy curve bear flattened on Tuesday, with 2s running ~8.5bp cheaper on the day, while 30s were little changed come the bell. Some of the Fed rate hike premium returned to the market, which aided the cheapening in the front end of the curve, allowing the 2-/10-Year yield spread to move to fresh cycle lows. The weakness in the front end allowed 2-Year Tsy supply to stop through WI by 0.6bp, with the cover ratio moderating a touch vs. the prev. auction, but that metric remained above the recent auction averages. Dealer takedown slid to the lowest level on record (for a 2-Year auction). Fedspeak from Bostic (’24 voter) failed to add anything in the way of new information.
• Fedspeak from Daly & 5-Year Tsy supply headline the NY docket on Wednesday.