T-Notes Tight At Re-Open, 20s Lagged On Monday

T-Notes narrow at the re-open, last trading -0-02 at 132-09. This comes after the contract went out at worst levels of the day on Monday, with the majority of the 5+-Year benchmarks on the cash Tsy curve cheapening by ~2.0bp. 20s were the exception to the rule, cheapening by ~4.0bp come the close, as a heavy offer to cover ratio was seen in the Fed's newly defined 10- to 22.5-Year Tsy purchase operation. For the record, 20s have now cheapened by ~10bp on the 10-/20-/30-Year fly over the past month or so, as investors reacted to comments from manager of the Fed's SOMA, Lorie Logan, after she noted that "we plan to make minor technical adjustments to our purchase sectors and increase the frequency at which we update purchase allocations to remain roughly proportional to the outstanding supply of nominal coupon securities and TIPS. We expect to announce these as a part of a normal purchase calendar release in coming months." The offer to cover ratio may have also been influenced by the proximity to Wednesday's 20-Year Tsy auction.

• NY flow was headlined by what appeared to be a FV/WN block flattener trader (-13,022 vs. +2,033) and what seemed to be the liquidation of a sizable existing long TYN1 130.50/129.50/128.50/127.50 put condor position for a 0-01 loss.
• Comments from Dallas Fed President Kaplan are hitting the wires at present, but there is nothing in the way of any real note evident thus far. A reminder that Monday saw Fed Vice Chair Clarida & Atlanta Fed President Bostic stick to their respective scripts.
• There is little in the way of broader tier 1 risk events scheduled for Asia-Pac hours on Tuesday.