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Risk Appetite Sours As Russia/Ukraine Tensions Heat Up

US TSYS
Tsys holding weaker across the board after the bell -- near the middle of the NY session range after some mid-morning whip-saw action. Yield curves mostly steeper, off early flatter levels w/ 5s30s just over 39.0 (+1.80). Heavy volumes driven by spike in Mar/Jun futures roll (Jun takes lead on Feb 28).
  • No market react to late SF Fed president Daly comments supporting liftoff in March absent "significant negative surprise" for economy, with as many as four hikes for the year.
  • Session opened with a false risk-on tone despite building tensions over Russia threat to Ukraine, Tsys weaker vs. modest rally in stocks (ESH2 tapped 4345.5 high). Tsys sold off/extended session low midmorning (30YY 2.2927% high) with trading desks citing rate lock hedging vs. surge in corporate debt issuance (near $11B on day not exceptionally large however).
  • Tsys reversed course, bouncing on headlines that Russia is within 48 hours of full-scale invasion of Ukraine. Equities sold off sharply into the close, SPX emini taps 4216.75 low.
  • White House annc'd expanded sanctions on Russia elites and Nordstream 2 pipeline.
  • Futures moderated through the second half holding modestly weaker after $53B 5Y note auction (91282CEC1) small stop: 1.880% high yield vs. 1.882% WI; 2.49x bid-to-cover vs. 2.50x last month.
  • Limited option volumes focused on building downside (rate hike) put positions.
  • The 2-Yr yield is up 4.7bps at 1.5956%, 5-Yr is up 2.4bps at 1.8864%, 10-Yr is up 3.1bps at 1.9703%, and 30-Yr is up 3bps at 2.2666%.
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