Modestly Lower In Asia

An e-mini bid linked to fiscal hope re: U.S. President Biden’s BBB plan applied some modest pressure to Tsys overnight, with TYH2 last -0-03 at 131-02, just off the base of the contract’s 0-06 overnight range. Cash Tsys run flat to 0.5bp cheaper across the curve.

• To recap, Monday saw the space retreat from best levels (registered during the European morning). The weakness in the long end extended late in the NY day, with selling flows in futures observed. Some pointed to concession ahead of Tuesday’s 20-Year Tsy auction (indeed, 20s cheapened by ~2bp on the 10-/20-/30-Year fly, although 30s had moved in a parallel fashion vs. 20s come the close, pulling the structure back from its daily extreme), but we would also flag several source reports re: Biden’s BBB scheme. POLITICO noted that “Sen. Joe Manchin (D-W.Va.) and President Joe Biden spoke Sunday night after a major blowup in negotiations around the president’s domestic agenda, three people familiar with the call told POLITICO. The conversation ended with a sense that negotiations would, in fact, resume around the Build Back Better Act in some form in the new year. The tone of conversation was cordial and it was agreed that they would speak again on legislative priorities.” Twist steepening was observed on the curve, with paper out to 5s ~1bp richer on the day, while 30s cheapened by nearly 5bp. Equities were much less willing to unwind their early moves, with the 3 major U.S. indices closing over 1% lower on the day.
• The aforementioned round of 20-Year U.S. Tsy supply will provide the focal point of the U.S. docket on Tuesday. Participants also await President Biden’s Tuesday address. White House press secretary Psaki has noted that the speech is 'not about locking the country down,' but it will focus on the vaccination drive.