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US 10YR FUTURE TECHS

(H2) Approaching The Key Bear Trigger

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TYH2 hovers around late NY levels, a touch above NY lows, last +0-02+ at 130-23+.

  • Cautious optimism re: omicron pressured the U.S. Tsy space on Monday, with the bearish impulse extending as we moved through the day, steepening the curve. 2s were ~4.5bp cheaper come the bell, while 30s were ~10bp cheaper on the day. Firmer equities and crude prices fed into the weakness.
  • $-denominated IG issuance also applied pressure, with swap spreads widening on the back of that dynamic, suggesting payside flows in the swap space added to the broader Tsy weakness.
  • On the flow side, the NY morning saw a TU/UXY block steepener (+14,000/-4,700), which also added momentum.
  • 3-Year Tsy supply headlines the local docket on Tuesday, with final Q3 productivity and unit labour costs, as well as the monthly trade balance and consumer credit readings also due.