Yields Recede After Making New Highs

Large range for Tsys after Bonds lead a steep sell-off early Wed, talk of negative convexity selling while stops triggered, exacerbating early move that accelerated after NY open. Rates recovered appr half the move by noon after making new high yields before 1000ET (10YY 1.4337%; 30YY 2.2910%) while yld curves extend bear steepening (5s30s 166.984). Fed systems crashed late, gradual recovery.

• Early sell-off not data related, though 1000ET Jan new-home sales better than exp at 923,000 vs. 856,000 est, and Fed Chair Powell repeated his Tue's Senate Banking Comm performance. More likely due to ongoing reflation trade theme the unexpected strength of which caught some off guard (tight stops).
• Other Fed Speak: Gov Brainard largely repeated much of the Fed leadership's recent thinking about QE, inflation and the labor market in a speech at Harvard today; VC Clarida's Comments Echo Powell Dovishness.
• Large Eurodollar Green pack Block 7k -0.045, likely swap related buyer, spds seeing decent tightening across the curve, particularly in 10s-30s, payer unwinds on the sell-off in rates.
• Overall heavy volumes as March/June Tsy futures roll climbed over 80% completion. Tsys dipped briefly after US Tsy $61B 5Y Note auction tailed: high yld of 0.621% (0.424% last month) vs. 0.615% WI; 2.24 bid/cover.
• The 2-Yr yield is up 1.4bps at 0.125%, 5-Yr is up 4.1bps at 0.6069%, 10-Yr is up 4.1bps at 1.3824%, and 30-Yr is up 5.4bps at 2.234%.