Resistance Tested

Core FI firmed overnight with the U.S. fiscal impasse, suggestions that the U.S.-Iranian talks may not be quite as advanced as some have suggested (per BBG sources), news that a Syrian missile fell near an Israeli nuclear site (triggering a retaliatory attack) & the COVID situation in India all noted in Asia-Pac hours.

• Bulls were not able to overcome technical resistance in T-Notes, in the form of the 50-day EMA, with that contract now 0-01+ off highs, printing +0-06 at 132-23. Meanwhile, cash trade saw the recent low in 10-Year yields hold firm, although that benchmark continues to trade below its 50-DMA (after breaching that metric for the first time since November). The curve has bull flattened, with 10+-Year paper sitting 2.5bp richer on the day. Regional participants have seemingly used the uptick to initiate downside plays/hedges, with 20.0K TYM1 131.50/130.50 put spreads lifted on block (after 20.0K TYM1 131.00/130.00 put spreads were lifted on block during Asia-Pac trade earlier this week), and 5.0K FVM1 122.25 puts lifted on screen, although the former may have represented a position rejig.
• As a reminder, Tsys clung to a tight range on Wednesday, yields little changed across the curve come the close, with T-Notes sticking to the upper end of Tuesday's range (outside of a very limited and brief look above during early NY trade). There was some modest cheapening around the BoC decision, which saw the Bank leave its benchmark interest rate at unchanged levels and trim its asset purchases (with some erroneous pre-decision headlines creating some chop). The latest round of 20-Year Tsy supply was well received (aided by the BoC-related concession), stopping through WI by 0.9bp, with a particularly impressive takedown breakdown, while the cover ratio nudged lower but still held above the recent average.
• 5-Year TIPS supply, the end-of-month Tsy auction announcement and weekly jobless claims data headline locally on Thursday.