TYH2 Through Monday’s Lows

Core FI markets continued to leak lower during Asia-Pac hours, with FT reports pointing to the potential for de-escalation when it comes Russia-related geopolitical tensions potentially aiding the cheapening.

• TYH2 took out Monday’s Asia lows, with focus now switching to nearby Fibonacci support (126-16), as the contract trades -0-09+ at 126-19+, just off worst levels of the day. Cash Tsy trade saw 10-Year yields register fresh multi-year highs (with the same holding true for 2s & 5s), with the major benchmarks cheapening by 2-4bp, as the front end led the way lower. A 2.5K block sale FVH2 118.50 puts headlined on the flow side in Asia.
• To recap, the cash Tsy curve was subjected to some very modest twist steepening pressure on Monday, with the long end retracing from intraday cheaps on the back of comments from ECB President Lagarde, who offered little in the way of fresh hawkish fuel. Lagarde pointed to a need for a “gradual” shift in policy settings, while stressing that the Bank wants to maintain its optionality. 2s were ~2bp richer on the day, while 10+-Year paper finished the session ~1bp cheaper. The curve pivoted around the 5- to 7-Year zone.
• NFIB small business optimism data and the latest round of 3-Year Tsy supply headline the NY docket on Tuesday.