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Ticking Higher at Re-open

US TSYS

TYH2 ticks higher at the re-open, printing unch at 126-09 at typing. The contract finished a touch above lows on Wednesday. News that President Putin chose not to respond to a request for a phone call with his Ukrainian counterpart, and continued angst on the part of Ukraine when it comes to the situation in the separatist DPR & LPR regions has put a light bid into futures at the re-open.

  • Tsys cheapened on Wednesday, with participants happy to sell after the initial rounds of western sanctions on Russia appeared to be less restrictive than many had feared (both for Russia and the wider global economy). That left the major benchmarks 2.5-6.5bp cheaper come the close, as the curve bear steepened, with 20s providing the weak point on the curve. Broader volume was supported by a jump in futures roll activity.
  • Widening breakevens (a product of a surge in the soft commodity space) seemingly applied further pressure to Tsys, although weakness in equities, continued worry re: the Russia-Ukraine standoff (separatists officially asking for Russian help to “repel” Ukraine and the widening of U.S. sanctions to cover the Nord Stream 2 pipeline) and a solid 5-Year Tsy auction seemingly limited the weakness.
  • In terms of auction specifics, 5-Year supply stopped through WI by 0.1bp, with the cover ratio holding steady, just above the recent auction average, while dealer takedown hit the lowest levels ever observed at a 5-Year auction.
  • San Francisco Fed President Daly (’24 voter) reaffirmed her support for a March rate hike, while revealing her expectations that the Fed will have to conduct at least 4 rate hikes in ’22. She pointed to the need for a 25bp hike at the March meeting, while pointing to a “down the road” assessment re: the need for 50bp rate hikes, stressing that the benefits of front-loading policy are not backed by research.
  • Looking ahead, there isn’t much in the way of tier 1 headline risk slated for Asia-Pac hours. Meanwhile, Thursday’s NY session will be headlined by weekly jobless claims data, an updated Q4 GDP print, new home sales and several regional Fed activity indicators. We will also get Fedspeak from Barkin, Bostic, Daly & Mester, in addition to 7-Year Tsy supply.
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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