Tsys Near Highs, COVID Variant More Rapidly Transmissible

Rates extended highs across the curve into the close as virus concerns at the start of winter gained traction.

• Tsys have quietly climbed back to overnight highs by midmorning, anemic volumes slow to improve. "Don't be short a quiet market," one trading desk cautions, keeping a wary eye on Covid data, stimulus bill, geo-pol related headline risks.
• By midday, Tsy futures extended session highs, risk-off measure with equities nearing overnight lows, apparently on the back of latest CDC headlines regarding new virus headlines. Trading desks suggested algos were keying in on "more rapidly transmissible" variant. Risk-off support continued on light volumes into the close (TYH appr 710k).
• No react to decent round of data (GDP, Cons Conf, Existing Home Sales), Covid-related headlines tempered slightly by stimulus relief passing Congress late Monday, still await Pres Trump signature today.
• US Tsy $15B 5Y-TIPS auction re-open (9127962Q1), yields -1.575% (compared to -1.320% prior) vs. -1.545%% WI; 2.86 bid/cover vs. 2.66 prior. The 2-Yr yield is down 0.4bps at 0.1169%, 5-Yr is down 1.8bps at 0.3622%, 10-Yr is down 1.8bps at 0.9164%, and 30-Yr is down 2.3bps at 1.6496%.