T-Notes Edge Higher At Reopen After Curve Steepened Wednesday

TYH2 edges higher at the re-open, last unch. at 130-06+, after the contract closed NY dealing a little above Wednesday’s worst levels.

• The cash Tsy curve twist steepened on the day, with 2s richening by ~1bp, while 30s cheapened by 9bp, allowing the 5-/30-Year yield spread to steepen away from Tuesday’s post-COVID flats.
• Headlines pointing to a third dose of the existing Pfizer-BioNTech COVID vaccine “neutralising” the omicron COVID strain allowed the space to cheapen after early richening on the back of worry surrounding the deployment of the UK’s plan B when it comes to dealing with omicron. Equities were much more limited, with e-minis finishing shy of their early NY highs.
• Early FV futures block sales were noted during Wednesday trade, adding to the pressure.
• 10-Year Tsy supply tailed by 0.4bp. The cover ratio edged higher vs. the prev. 10-Year offering, although this was still short of the recent average. Meanwhile, dealer takedown ticked lower, edging just below its own recent average. Pre-auction concession, with one eye on 30-Year supply, was cited as another source of pressure.
• Chinese inflation data headlines the Asia-Pac docket, although this hasn’t been much of a mover when it comes to broader risk sentiment in recent times. Meanwhile, NY hours will see weekly jobless claims data and 30-Year Tsy supply.