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Tsy Extend Duration, Heavy Volume As Equity Rally Falters

US TSYS SUMMARY

Monday was a choppy day all around -- rates and equities well bid on the open, the latter gapping lower ahead midday. No One Driver:

  • Desks cited multiple headlines for rate bid that started well before NY open:
  • German Navy sending ship to Japan (keep eye on activity in the South China Sea), pharmaceutical co Merck canceled their Covid vaccine efforts after poor results. Rates continued to extend duration while equities gapped lower, desks pointed to several headlines: Sen majority leader Schumer saying stimulus
  • Rates continued to extend duration while equities gapped lower, desks pointed to several headlines: Sen majority leader Schumer saying stimulus effort to pass in next 4-6 weeks, Rep Sen Portman will not run for re-election (makes Trump imp conviction more likely ?), German Dax also hit as equities reversed gains, stops triggered.
  • Heavy surge in volumes, TYH more than doubled in the first hour of trade. Large Blocks an hour later: 1021:04ET: 11,190 TUH 110-15.62 buy through 110-15.5 offer; 22,900 TYH 137-10.5 buy through 137-09 offer; 12,467 UXYH 154-13 buy through 154-11.5 offer. Bbg breakdown: 2s7s10s cash fly; DV01 $460k/$2M/$1.8M.
  • Record $60B 2Y note auction stopped through: drew 0.125% (0.137% last month) vs. 0.127% WI, bid/cover 2.67 vs. 2.45 previous.
  • The 2-Yr yield is down 0.2bps at 0.1189%, 5-Yr is down 2.4bps at 0.4071%, 10-Yr is down 4.9bps at 1.0363%, and 30-Yr is down 5bps at 1.7962%.
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