Tsys Drift Through Asian Hours

The early Asia Tsy bid has faded from extremes, leaving TYH2 +0-07 at 130-25, with cash Tsys dealing 1bp richer to 0.5bp cheaper across the major benchmarks, as the curve comes under some light twist steepening pressure. Headline flow remains light, Asia-Pac cash traders have seemingly been willing to sell into the late NY/early Asia 20-Year Tsy auction-inspired strength.

• To recap, the major benchmarks finished little changed to 5bp cheaper on Tuesday, with 5s leading the losses. 20s outperformed on the back of a stellar round of 20-Year supply. The risk-positive tone set during Asia-Pac hours (aided by source reports pointing to fresh Manchin-Biden discussions re: BBB in the New Year) gathered pace through Tuesday trade, with e-minis fully unwinding Monday’s move lower. Biden’s address re: COVID wasn’t a market mover, with the central tenants flagged ahead of time, while there was nothing in the way of notable COVID-related restrictions offered. As mentioned, 20-Year Tsy supply was particularly well received, stopping through WI by a little over 2.0bp (the most sizable stop through observed since 20-Year supply was reintroduced last year), while the dealer takedown slid comfortably below the 6-auction average (the lowest on record since the previously flagged reintroduction). The strong auction allowed the space to base, after curve-wide cheaps were registered pre-supply, with the early bear steepening unwound as belly underperformance came to the fore.
• U.S. hours will see the release of the final GDP readings for Q3, Chicago Fed activity data, consumer confidence readings from the Conference Board & the latest existing home sales print.