T-Notes Tag Another Low, Sizable TY Option Flow Seen In Asia

T-Notes recovered from worst levels of the Asia-Pac session after early trade saw Monday's low breached, with some profit taking on low vol TY downside plays (both on screen and via block), before further block flow pointed to a position rejig and further profit taking, as some suggested that the Asia-Pac participant may have left themselves short 30K of both the TYH1 136.50/136.00 and 136.50/135.50 put spreads. Macro headline flow was generally light, with Fed's Kaplan (a non-voter in '21) pointing to the potential for QE tapering later this year and a sign from Messrs Trump & Pence that the President plans to see out the short remainder of his term headlining overnight. RTRS source reports pointing to the potential for a deeper Chinese crackdown re: the HK political sphere may have provided some light support. T-Notes last -0-03+ at 136-10, while cash Tsys trade little changed across the curve.

• As a reminder, the U.S. Tsy space cheapened on Monday, with the 7-10 Year zone representing the weak point on the cash curve (cheapening by ~3.0bp come the bell), while T-Notes finished the session at worst levels of the day. The start of mid-month Tsy supply added some further impetus to the recent move higher in yields, with the fiscal dynamic in the U.S. still front and centre. The latest 3-Year note auction saw a 0.3bp tail, although the takedown metrics firmed, as indirect takedown nudged higher and dealer takedown moderated at the margins vs. prev. 3-Year supply. Still, the major takedown metrics showed little deviation from the recent averages, even with dealer takedown ever so slightly below the recent norm. U.S. political matters also remained at the fore, with the House movements re: Trump impeachment developing in line with weekend guidance, while the FBI issued warnings re: unrest across the U.S. as we head towards Biden's Presidential inauguration.
• Focus today moves to Fedspeak from Brainard, George & Rosengren, 10-Year supply from the Tsy, in addition to JOLTS & NFIB small biz confidence data.