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Tsy/Eurodollar Roundup: Taking Geopol Tension Seriously

US TSYS
Rates held stubbornly to a narrow range Thursday as rising geopolitical tensions between the US and China as well as Russia helped reverse decent first half gains in equities: ESH2 4594.0 late morning highs vs. 4499.0 after the FI close.
  • Equities started to trim gains following latest WSJ headlines on US/Russia tensions over Ukraine providing arms definitely turning up the heat: "U.S. Gives Baltic States Approval to Send U.S.-Made Weapons to Ukraine, Sources Say; Decision Will Enable Estonia, Lithuania, Latvia to Send Anti-Tank Weapons, Air Defense Systems to Ukraine", WSJ.
  • Additional tension remains with China: Chinese military spokesperson Colonel Tian Junli has said that China has issued an 'eviction warning' to US warship USS Benfold operating in disputed waters around the Xisha island chain in the South China Sea
  • Markets largely shrugged off early data: weekly claims gained 55k to 286k, higher than est 225k, continuing claims 1.635M vs. 1.563M est. Trade desks noted better buying from fast$, prop and option trading accts, carry-over real$ selling 10s and 30s.
  • Selling Into Session Highs: Intermediates still outperforming short/long-end rates while trading desks reporting pick-up in sell interest: along with deal-tied rate-lock selling in 3s-10s, real$ and leveraged acct selling 5s, real$ selling 20s and 30s while central bank buying noted in 10s. Two-way option-related flow noted ahead Fri's Feb option expiration.
  • The 2-Yr yield is down 0.8bps at 1.0494%, 5-Yr is down 3.2bps at 1.6165%, 10-Yr is down 3.2bps at 1.8326%, and 30-Yr is down 3.7bps at 2.1389%.
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