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Pres Biden Budget Proposal Ests


Needle Still Points South


Resistance Remains Intact


Reverse Repo Operation


Softer Greenback Extends GBP Bounce

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It has been a quiet Asia-Pac session in terms of broader news flow. We didn't see much to drive the recent bid in the U.S. Tsy space, but e-minis traded off best levels, with Bitcoin trading back below $30,000 for the first time since late June. We are always cautious when pointing to direct correlations with cryptocurrencies, but that could be at least a partial driver here. Also, the bid in the ACGB space could be providing another (modest) leg of support. T-Notes last -0-03+ at 134-18+, after tagging best levels of 134-21, once again operating on healthy volume of ~135K. The cash curve has twist steepened around the 7-Year point of the curve.

  • As reminder, the space finished of richest levels on Monday, with equities ticking away from worst levels ahead of the NY close. The bull flattening of the cash Tsy curve was still notable, with 2s finishing little changed, while the long end richened by ~10bp. The lower oil/equity/yield theme was in play from the Asia re-open, with worries surrounding the delta COVID variant evident. Early NY trade saw the moves extend, with the usual talk of positioning washouts for bearish Tsy/Fed hiking bets. Volume comfortably topped the typical averages. Tightening in long end swap spreads also played into the richening theme, with receiving flows clearly dominating on the day. Block buying of long end futures was witnessed during the NY morning, while an FV/US/WN fly-like structure (long the US leg) was seen during the London morning. We should also flag that a group led by the U.S. attributed the well documented Microsoft Exchange hack to groups that are linked to the Chinese government, which would have added some geopolitical worry into the underlying bid.
  • Housing starts and building permits headline the local docket during NY hours.