Tsy/Eurodollar Roundup: Appetite for Risk Evaporates

After robust midday trade, Tsy futures bounced back near early session/week highs, TYH2 tapped 128-16 -- shy of Jan 13 high/20D EMA resistance at 128-27. Equities under heavy pressure after FI close: SPX emini: 4393.0 -83.75.

• Heavy volumes (TYH2>1.8M) by the close as risk-off tone gained momentum (Russia/Ukraine and China/S China Sea flashpoints). Aside from exogenous geopolitical risk-off support/bounce, underlying positioning continues to price in tighter Fed policy for 2022 ahead next week's FOMC: four .25bp quarterly rate hikes to start in March.
• After some chunky Block buys in 2s and 5s earlier, buy-stops triggered on the rally while trading desks report better leveraged$ acct selling in 10s and 30s, prop acct steepener unwinds in shorts to intermediates.
• No corporate supply today, but hear reports of selling ahead next week's 2s, 5s and 7Y Tsy supply; Corp debt issuance expected to resume after $188.31B issued on Month so far.
• Feb serial ops expire today. Decent amount of options coming off the sheets for a serial expiry. Though accts have been active unwinding/rolling to avoid pin risk, today's rally have exposed larger positions in higher strikes, namely TYG 128 and FVG 119.25
• Option trade appears more mixed with two-way puts and larger unwinds of tactical longs (-25k TYH 127 puts, 18-21 after heavy buying this week), large 5Y call sale/exit going short (total over 83,000 FVH 120 calls from 15-19).
• The 2-Yr yield is down 3.4bps at 0.9912%, 5-Yr is down 4.1bps at 1.5454%, 10-Yr is down 5.7bps at 1.7474%, and 30-Yr is down 5.3bps at 2.0638%.