Pressure Maintained, Even With Cash Markets Closed

Monday's Asia-Pac trade was all about the continuation of the reflation narrative, with sizeable enough core FI market movements seen in the timezone, especially when you consider the lower liquidity backdrop owing to the Lunar New Year & U.S. Presidents Day holidays. The Nikkei 225 moved above 30,000 for the first time in decades, while the 3 major e-mini contracts tagged new all-time highs and oil was well bid.

• T-Notes ran through Friday's late lows, with the contract last printing -0-11+ at 136-06 on healthy volume of ~170K. A reminder that cash Tsys will not be open until Tuesday's Asia-Pac session, with the aforementioned Presidents Day holiday in play.
• The space was subjected to bear steepening pressure on Friday, with 30s going out ~6.5bp cheaper on the day and longer dated breakevens widening by over 2.0bp as oil price dynamics and an uptick in inflation expectations in the latest UoM sentiment survey stood at the fore. The broader risk-on theme and incremental positive news flow re: the U.S. vaccine supply story may have also fed into Tsy trade. The weakness resulted in U.S. 10s and 30s tagging fresh cycle highs in yield terms, with the respective benchmarks closing above 1.20% and 2.00%. Still, options flow saw some interest for upside protection (price wise), with buying of the TYJ1 137.00/137.50 call spread and TYM1 137.50 calls seen. Friday also saw U.S. Tsy Sec Yellen pressing G7 FinMins & central bank govs to "go big" with fiscal support, while she stressed that the Biden administration will undertake a policy of "international engagement."