Tight Overnight, No Reaction To BoJ, Curve A Touch Flatter

U.S. Tsys held a narrow range in Asia-Pac hours, looking through the latest BoJ decision, while participants witnessed a combative start to the Sino-U.S. summit in Alaska. T-Notes operated around their late NY levels for the duration of overnight trade, last dealing +0-05 at 131-13+. Cash trade has seen some twist flattening of the Tsy curve, with 30s richening by ~3.0bp on the day. It is also worth noting that the latest weekly release from the NY Fed revealed that primary dealers extended on the record selling of Tsys witnessed in the week to March 3, shedding a further ~16bn of Tsy holdings in the week to March 10, taking the total shed over that 2 week period to a little over $80bn (with SLR concerns and the cheapening of the space at the fore).

• As a reminder, the space cheapened on Thursday with Tsys across the belly of the curve finishing ~6.5bp cheaper on the day, while the wings cheapened by 2-3bp. 5+-Year yields tapped fresh cycle highs on the day, with an aggressive round of cheapening witnessed during early London trade, building on the moves witnessed in Asia-Pac hours (aided by the latest bout of BoJ speculation). 10-Year yields had a brief and limited look above 1.75% (several similar moves above that level became apparent as we moved through the day). A much stronger than expected survey from the Philly Fed resulted in a fresh bout of pressure during early NY trade, with TY and US block sales observed. The feedthrough from higher yields pressured the equity space, which in turn provided some support to Tsys later in the NY day as the sell off in stocks accelerated, with a sharp pullback in oil also helping Tsys off of intraday cheaps. Geopolitical tensions centring on Russia and the COVID situation in Europe also helped the bid. Longer dated swap spreads tightened late in the day, with questions surrounding SLR exemption for Tsys continuing to do the rounds, and footprints of receiver side flows showing up in the swap space.
• The ongoing Sino-U.S. summit provides the major local focal point ahead of the weekend.