RBA Supports Space, FOMC & NFPs Eyed

There hasn't been much in the way of domestic headline flow for U.S. Tsys to absorb, outside of the Chairman of the House Rules Committee, McGovern, noting that a House panel is likely to meet on Wednesday re: discussions surrounding President Biden's spending plan. More widely, the post-RBA bid in ACGBs has provided a bid for the space, while the lockdown of just under 20 schools in the Chinese capital of Beijing may have exposed some nerves. TYZ1 has hit fresh session highs in recent trade, before easing back a touch, last trading +0-07 at 130-28, while cash Tsys run little changed to 2.0bp richer across the curve, unwinding the early, modest cheapening and more. Bull steepening has kicked into play as the front end leads the rally. Asia flow was headlined by a block buy of TYZ1 (+1,250), while the short end saw a screen lift of the 0EZ1 99.625/99.375/99.125 put fly (+7.5K).

• To recap, the curve steepened on Monday, with yields running little changed out to 10s come the close, while 30s cheapened by ~2.5bp on the day. Factors weighing on the space during the NY morning included the burden of US$ IG issuance and a fresh record high for domestic equities, although a pullback in stocks allowed the space to recover from cheapest levels of the session. An uptick in the Treasury's Q4 borrowing estimate (which rose by $312bn) applied a brief round of pressure late in the day before the rally resumed. Desks pointed to two-way flow ahead of the impending risk events (FOMC on Wednesday and NFPs on Friday).
• There is nothing in the way of notable domestic releases scheduled on Tuesday, which will allow participants to zero in on the FOMC meeting.