Some Support In Asia

Tsys saw no tangible impact on the space as China released initial guidance on a 3-/5-/10-/30-Year multi tranche round of US$ supply, with such intentions already outlined yesterday. It looks like regional Asia-Pac investors stepped in to buy the latest leg lower, which, when coupled with spill over from ACGB price action, supported the space for a chunk of overnight dealing, before a fade from best levels. TYZ1 +0-00+ at 130-25, while cash Tsy trade has seen richening of ~2.0bp across the curve on the day.

• To recap, the belly of the curve drove the weakness witnessed across much of the space during the first session of the week, with the 5- to 7-Year sector cheapening by ~4.5bp, while 30s finished the session marginally richer. Global matters were at the fore when it came to the twist flattening of the curve, with stronger than expected NZ CPI data & hawkish weekend comments from BoE Governor Bailey noted. Fed hike expectations also weighed on the belly. In sum, this allowed the 5-/30-Year yield spread to tag the flattest levels seen since Apr '20, although that spread and the broader Tsy space managed to finish shy of intraday lows. The recent cheapening has resulted in J.P.Morgan entering a tactical long in 2s, as they see limited scope for further aggressive repricing at the front end of the curve. On the flow side desks reported better selling in 5s to 10s from real-money and bank portfolios, in addition to tactical steepener unwinds, as well as deal-tied selling as corporate and supra-sovereign issuance picked up. Goldman Sachs issued $9bn over 5 tranches on Monday, while China held investor calls re: the aforementioned issuance
• Tuesday's NY docket will be headlined by housing starts & building permits data, with a raft of Fedspeak also due.