Omicron Worry Dominates

TYH2 a touch off late NY highs, dealing +0-03+ at 131-01, with e-minis regaining some poise, printing ~+0.3% after the re-open

• Omicron worry kicked in during the second half of the NY session, with a higher state of alert creeping in across the globe (and the first case detected in the U.S.), even as questions remain evident re: the mortality threat that the new COVID variant poses. That allowed the U.S. Tsy curve to bull flatten, with 2s finishing ~1.5bp richer on the day, while 30s were ~5bp better off, after the early cheapening impetus was quickly unwound. Late block buys in the long end of the futures curve (+3,500 UXY, +3,000 US & +5,050 WN) added to the broader momentum into the bell.
• ADP employment data provided no meaningful surprise, while round 2 of Fed Chair Powell’s testimony echoed much of what we heard on Tuesday. Powell underlined the idea that the tapering move doesn’t need to be a disruptive event for markets.
• Challenger jobs cuts and weekly jobless claims data headline the U.S. economic docket on Thursday, while Fedspeak will be provided by Quarles, Bostic, Daly & Barkin.