Warnings From Asia Provide Support, Aussie Bonds Push Off Best Levels

A light bid briefly crept into U.S. Tsys overnight, aided by Chinese regulatory body warnings re: bubbles in domestic property markets and offshore financial markets, while the Hang Seng struggled after Hong Kong's Financial Secretary failed to rule out further stamp duty hikes for equity trading at some point down the line (although he said that no such plans were in the pipeline at present). E-minis have nudged lower as a result. However, the space then pulled back from best levels on cues from Aussie bonds post-RBA. T-Notes last +0-07+ at 133-13+, with cash Tsys trading unchanged to 1.0bp richer across the curve. Overnight flow was headlined by an 1,875 lot block seller of TYJ1 134.00 puts which likely represented profit taking on longs given that the TYJ1 134.00 puts saw a cumulative 9,375 lots lifted via block trades during Asia-Pac hours in the month of February, between prices of 0-13 and 0-18 (all of which were executed in multiples of 1,875).

• The space recovered into the bell on Monday after failing to push below 133-00 in early NY trade, with the intraday range much more confined vs. Thursday & Friday of last week. Twist steepening was evident on the curve throughout Monday's session, with the belly outperforming as 5s ended the day 3.5bp richer, while 30s were ~4.0bp cheaper. A heavy corporate issuance slated weighed on longer-dated swap spreads. Comments from Fed Governor Brainard provided a sporadic, albeit short lived, round of support for the space during the NY morning, as she noted that valuations are elevated in a number of asset classes. Elsewhere, 2021 FOMC voter Barkin played down any worries re: the recent uptick in longer dated Tsy yields, noting that he would be disappointed if we didn't see yields rise as the outlook improves.