Tight Asia Trade Observed

A block lift of TYH2 futures (+2.1K) followed some light screen buying in Asia, allowing the contract to extend to fresh session highs, before backing off. Still, the contract operated in a particularly narrow 0-03+ range, well within the boundaries observed in recent weeks, and just off Wednesday’s lows. TYH2 last +0-01 at 130-08. Cash Tsys sit ~0.5-1.0bp richer across the curve, with the belly leading the bid. There hasn’t been anything in the way of notable macro headline flow observed overnight.

• To recap, fresh closing highs for the S&P 500 & DJIA, coupled with pre-auction concession into the latest round of 7-Year Tsy supply, pressured Tsys on Wednesday. 7-Year supply resulted in the third tail witnessed in this week’s round of coupon Tsy supply (more specifics below), promoting a fresh round of selling after what looked like short cover into auction. Cash Tsys ran flat to 7bp cheaper come the close as a result, with 10s providing the weak point on the curve, while 2s were little changed. Some noted an increase in selling pressure in futures as 10- & 30-Year yields crossed back above their 50-DMAs for the first time since late November. Still, the fact that the session fell between the Christmas and New Year yardsticks meant that it remained at the lower end of the spectrum in volume terms. In terms of specifics, 7-Year supply generated the third tail witnessed at a Tsy auction this week, although that particular tail was over 2.0bp wide, while this week’s 2- & 5-Year auctions saw tails of ~0.5bp. The 7-Year auction also saw the cover ratio tick lower vs. prev., moving below the recent average witnessed at 7-Year auctions, with dealer takedown nudging higher.
• Weekly jobless claims and the latest MNI Chicago PMI print will headline Thursday’s NY docket, with a call between U.S. President Biden & his Russian counterpart Putin also set to garner attention.