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Stable Start After Bear Steepening

US TSYS

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.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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