Tsys Unchanged Into Europe After Busy Asia Trade

Cash Tsys are essentially unchanged across the curve after a fairly frenetic round of overnight dealing. TYM2 is last dealing +0-09+ at 118-15+, in line with late NY levels, 0-02 off the base of its 0-0-16+ range, with volume comfortably above 200K lots.

• The drift away from firmest levels of the session has continued through the second half of Asia-Pac trade, after the earlier technical/flow-related bid in U.S. Tsys faded.
• Note that the major U.S. Tsy futures contracts broke above their respective Monday highs in early Asia dealing, with yields across the curve through their Monday troughs. The richening took place at the same time that S&P 500 e-minis crossed below their Monday low (although technical support in the contract wasn’t tested) and Bitcoin looked below 30,000 (we do not usually comment on cryptocurrencies, but correlations with risk assets have increased in recent times).
• There was no overt headline news to trigger the move, leaving pure flows at the fore. Note that the move extended on the back of 3 block buys in TY futures (totaling 9,750 lots).
• A subsequent recovery in risk appetite, with the S&P 500 e-mini contract reclaiming the 4,000 level and mainland Chinese tech stocks (namely the ChiNext) reversing the early gap lower, allowed the space to move away from worst levels. Subsequent comments from Chinese market regulators have looked to soothe any worry re: Chinese equities, while a state-run media article flagged comments from analysts playing down the risk of further CNY depreciation.
• Small business optimism data is due during Tuesday’s NY session, with a deluge of Fedspeak (Williams, Waller, Mester, Kashkari & Barkin) & 3-Year Tsy supply also slated.