Tight Ranges In Play In Asia, 20-Year Supply Eyed

The U.S. Tsy space traded in a confined manner overnight. T-Notes unch. last at 132-12+, while cash Tsys trade little changed to 1.0bp cheaper across the curve, with 20s providing the weak point on the curve ahead of today's Tsy auction covering that tenor. Several desks point to the need for further concession to allow smooth digestion of the auction, even after the recent cheapening on the 10-/20-/30-Year fly, with a slower recovery in liquidity vs. longer dated Tsys & the recent refinement of Fed purchases in that area of the curve cited. There has been nothing in the way of meaningful headlines overnight, while the holiday in Hong Kong has removed liquidity from the Asia-Pac region. Flow has been dominated by a 10K block sale of the FVN1 124.00 calls.

• As a reminder, Tsys were rangebound on Tuesday, with T-Notes failing to make a meaningful break below Monday's low despite a couple of attempts, with the contract finishing NY trade just shy of best levels. Cash Tsys were little changed to a touch firmer come the bell, with the wings underperforming, while the 5- to 7-Year sector richened by ~2.0bp. Tier 1 news flow was relatively limited, with a light bid seen on the back of softer than expected U.S. housing starts data, allowing T-Notes to tag fresh session highs, ultimately setting an upper boundary for the contract on the day in the process. A negative day for equities and some downwards pressure in crude oil (linked to later dispelled chatter of a significant breakthrough in the Iranian talks) also provided bouts of (modest) demand for Tsys. Elsewhere, brisk $ IG issuance continued.
• In addition to the aforementioned round of 20-Year Tsy supply, Wednesday's U.S. docket includes the release of the minutes from the latest FOMC decision, which will be supplemented by commentary from Fed's Quarles, Bostic & Bullard.