Tight Ahead Of Another Round Of Supply

T-Notes have been happy to meander along, last -0-01 at 132-11, sitting within the confines of a 0-03+ range, with little in the way of meaningful macro headline flow apparent overnight. The cash Tsy curve has seen some light steepening, with longer dated Tsys cheapening by ~1.0bp vs. Monday's closing levels.

• As a reminder, cash Tsys traded unchanged to ~1.5bp cheaper come the bell on Monday, with very modest underperformance for 2- to 7-Year paper evident. Softer than expected durable goods data (albeit coupled with positive revisions to the previous month's readings) helped the space away from intraday cheaps, reversing some bear steepening during early NY dealing, although a firmer than expected manufacturing survey from the Dallas Fed ultimately capped the rally after T-Notes tapped fresh intraday highs. The space then coiled into the close, with nothing in the way of market reaction seen to the latest round of comments from NEC Director Deese, who tried to bypass any worry surrounding President Biden's plans re: tax increases. The FOMC-adjusted Tsy supply schedule didn't get off to the firmest start, with 2-Year supply tailing by 0.4bp, as the cover ratio slipped to below average levels and dealer participation jumped to above average levels. 5-Year supply was a little smoother, stopping on the screws, with a relatively steady cover ratio printing around the recent average, while dealer takedown nudged lower, printing a little below the recent average.
• Tuesday's 7-Year Tsy & 2-Year FRN auctions present the final issuance hurdles ahead of Wednesday's FOMC decision, while consumer confidence data headlines the local economic docket.