US: Republican Congressman Suggests He Could Support Iran War Powers Resolution

• "*TRUMP ON SOUTH KOREA TARIFF THREAT: WE'LL WORK SOMETHING OUT" (BBG)

Tsy futures trade mixed, curves twist steeper (2s10s +2.887 at 64.810) with the short end firmer ahead of the $70B 5Y note auction (91282CPW5) at 1300ET, WI is currently running at 3.821% (*see note below), 7.4bp cheaper vs. last month's sale.

• December auction recap: Tsy futures showed little reaction after the $70B 5Y note auction (91282CPN5) drew 3.747% high yield vs. 3.746% WI; 2.35x bid-to-cover vs. 2.41x prior. Peripheral stats: Indirect take-up receded to 59.51% from 61.35% prior, direct take up rose to 31.65% vs. 27.61% prior, while primary dealer take-up receded to 8.84% vs. 11.04% prior.
  • *Note: It is highly unlikely to see a repeat of yesterday's "funge" event when the 2Y high yield of 3.580% resulted "in the unscheduled reopening of the 5-year notes of series U-2028 (CUSIP NO. 91282CGH8)" - after todays sale resulted "in a high yield in a range of 3.500% through and including 3.624%"
  • According to the Tsy, if today's auction "results in a high yield in a range of 4.000% through and including 4.124%, the 5-year notes will be considered an additional issue of the outstanding 4% 7-year notes of Series G-2031 (CUSIP No. 91282CJX0) originally issued January 31, 2024."
  • Link: treasurydirect.gov/instit/annceresult/press/preanre/2026/SPL_20260122_2.pdf

• Gilt futures have pierced support at last Friday’s 90.94 low, currently -40 ticks at 90.91, a clear break of which would expose the Jan 2 low at 90.70. This reinforces a bear mode condition in the contract.
• In the cash space, 10-year yields are up 2.8bps to 4.525%, with topside focus on the Jan 5 high of 4.538%. Gilts underperform German counterparts, with the Gilt/Bund spread 2bps wider at 165bps.
• There hasn’t been much in the way of domestic newsflow today, with much of the focus in global markets centred on broad-based dollar weakness.
• A reminder that this week’s calendar is relatively light, with December money and credit data due on Friday.