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The short-end/belly of the curve is underperforming early Wednesday, with a generally risk-off atmosphere prevailing. Fiscal matters and 5Y supply are in focus, with an eye also on durable goods data.

  • 10Y yields below 1.60% for the first time since Oct 19: 2-Yr yield is up 2.2bps at 0.491%, 5-Yr is up 0.7bps at 1.1813%, 10-Yr is down 1.2bps at 1.5957%, and 30-Yr is down 1.8bps at 2.0231%.
  • The release at 0500ET of the Democrats' proposal to tax billionaires' (unrealized) asset gains pushed stock futures to session lows and Tsys to session highs.
  • That said, negotiations continue on the fiscal agenda, with little sign a deal among Democrats will materialize this week, let alone today. Politico sums up the state of play: "except for every sticking point, Dems are close to a deal".
  • Supply today: $28B 2Y FRN auction at 1130ET (alongside $40B in 119-day bills), and $61B 5Y Note auction at 1300ET.
  • Data today includes durable goods orders / wholesale and retail inventories / goods trade balance at 0830ET.
  • NY Fed buys $1.425B of 10-22.5Y Tsys.