Well Received 20-Year Supply Helps Tsys Form A Base On Tuesday

TYH2 hovers around late NY levels, last +0-07+ at 130-25+, after recovering from worst levels towards the end of the NY session.

• To recap, the major benchmarks finished little changed to 5bp cheaper, 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, 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.
• There isn’t any tier 1 data on Wednesday’s Asia-Pac docket, so it will be a pre-Christmas session of headline & market flow watching. 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.