Steeper On Tuesday, 2-Year Supply Sees Solid Demand

T-Notes -0-02 at 133-29+, testing the late NY lows at the re-open.

• As a reminder, the cash Tsy curve steepened on Tuesday, with 2s little changed and the long end running ~4.5bp cheaper at the bell. A bid in equities kept the space under pressure, while a 10K block sale of FV futures (~$510K DV01) helped keep the pressure on in late NY dealing. Mixed local data failed to provide any real impulse. We also saw a ~7K buyer of the TYZ1 131.50/136.50 strangle, while the short-end was dominated by a 55K buyer of the EDU3/Z3 spread during the NY morning. Futures rolls supported broader futures volume, with "normal" volume relatively subdued once rolls were netted off.
• A solid round of 2-Year supply (stopped through by 1.1bp, with the cover ratio moving above the recent averages and dealer takedown sliding to multi-year lows) put a brief bid into the space, before the cheapening resumed. Still, the 2-Year auction helped underpin the steepening theme.
• Late NY hours saw the House pass the $3.5tn budget resolution along party lines, while the bipartisan infrastructure bill was advanced. There is a non-binding commitment to vote on the infrastructure bill by the end of 27 September.
• There is a lack of tier 1 risk slated for Asia-Pac hours on Wednesday. Looking ahead to NY hours, we will see prelim durable goods data and the latest round of 5-Year supply.