Only A Touch Cheaper On Biden-Xi Call

The U.S. Tsy space is still relatively unmoved given the lack of clear, positive progress in a Biden-Xi phone call, with the readouts from both sides only providing the broad brushstrokes of the dialogue. Still, the space has cheapened marginally on the prospect of increased direct dialogue between the two Presidents. T-Notes have stuck to a 0-03 range during Asia-Pac dealing, last trading -0-02+ at 133-13+. Cash Tsys run unchanged to ~1.0bp cheaper on the day, with a marginal steepening bias evident on the curve. Broader perception surrounding the Biden-Xi call will be eyed in European & U.S. hours.

• To recap, T-Notes finished NY hours a little shy of best levels, as the cash curve bull flattened on Thursday, with 2s little changed and 30s the best part of 6.0bp richer come the bell. The space unwound its early bid during the European morning, trading to cheapest levels of the day around the ECB decision, even as EGBs rallied, before firming as we worked through NY hours, eventually aided by the aforementioned rally in EGBs & a strong round of 30-Year Tsy supply. Auction setup and $IG supply perhaps provided some of the early NY pressure. A more favourable than exp. round of initial jobless claims data may have also helped the space trade cheaper (briefly). In terms of auction specifics, 30s stopped through WI by 1.8bp, with the dealer takedown cratering to the lowest on record as the cover ratio pushed comfortably above the recent average. Fedspeak saw Governor Bowman point to her likely support re: the tapering process beginning later this year. Meanwhile, Atlanta Fed President Bostic ('21 voter) told the WSJ that he "believes the Fed will be able to pull back on its asset buying campaign this year, though he doesn't expect a decision to do so will come at the U.S. central bank's meeting this month."
• PPI & comments from Fed's Mester headline the local docket on Friday.