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T-Notes Off Asia Lows, Cash Closed

US TSYS

TYZ1 had a look through Wednesday's low in Asia before recovering, last -0-02 at 130-21+ vs. worst levels of 130-15. Initially, the spill over from the U.S. session, an uptick in Chinese equities and second round weakness in the ACGB space weighed. Cash Tsys will not trade on Thursday owing to the observance of the Veterans Day holiday. Downside interest has headlined on the flow side in the STIR space, with screen buying of 0EX1 99.00 puts seen (~18K lots lifted in total thus far).

  • To recap, the belly led the notable weakness witnessed across the curve on Wednesday, with 5s cheapening by 13.5bp come the close, while 2s and 30s finished ~9bp cheaper on the day. On the curve, the 5-/30-Year yield spread hit the flattest levels witnessed since the COVID-inspired vol. in Mar '20, while the 2-/5-/10-Year butterfly hit the widest levels seen since '15. Firmer CPI data was the initial catalyst for the belly-driven weakness (on Fed-repricing), while a huge tail on the latest round of 30-Year Tsy supply provided a further source of weakness later in the day. In terms of auction specifics, 30-Year supply saw a tail of over 5.0bp, while the cover ratio slid below its recent average as dealer takedown hit the highest level seen at a 30-Year auction since '20. We should also flag that late Wednesday saw reports of Evergrande paying the missed coupon payments on 3 $-denominated bonds before the 30-day grace period elapsed.
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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