FED: US TSY 29Y-10M BOND AUCTION: HIGH YLD 4.876%; ALLOT 15.44%

• RES 4: 113-13+ Low Feb 27 
• RES 3: 113-07+ High Mar 3
• RES 2: 113-03   High Mar 4  
• RES 1: 112-22/112-24+ 20-day EMA / High Mar 10
• PRICE:‌‌ 112-20 @ 16:40 GMT Mar 10
• SUP 1: 111-26+ Low Mar 6 and the bear trigger
• SUP 2: 111-21+ Low Feb 9
• SUP 3: 111-13+ Low Feb 5
• SUP 4: 111-06+ Low Jan 20 and a key support  

The current bear cycle in Treasuries remains intact and a fresh cycle low on Monday reinforces the bear theme. The recovery from yesterday’s is - for now - considered corrective. A resumption of the bear cycle would signal scope for an extension towards the next key support at 111-06+, the Jan 20 low.  Initial firm resistance is seen at 112-22, the 20-day EMA. It has been pierced, a clear break of it is required to signal a possible reversal.

Tuesday's Europe rates/bond options flow included:

• DUK6 106.20/106.00ps, bought for 4 in 4k
• OEM6 115.50/115ps, bought for 7 in 4k
• ERM6 97.87/97.93/98.00c fly, bought for 2.5 in 20k
• ERU6 97.87/97.9375/98.00c fly, bought for 2 in 10k
• ERM6 98.0625/98.1875cs, bought for 0.75 in 8k
• ERZ6 98.50c, sold at 1.5 in 40k (possibly closing)
• ERZ6 97.8125/97.875/97.9375c fly, bought for 0.75 in 10k
• SFIM6 96.25/96.00ps 1x2, sold at 0 in 10k
• SFIU6 96.55/96.65/96.75/96.85c condor, bought for 2 in 5k

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Since the launch of the joint Israeli-US strikes on Iran on 28 February and the subsequent regional conflict, there has been significant market interest in attempting to parse comments from political and military officials from all sides to try to gauge how long the war might last. This comes from the widespread view that a ‘short’ conflict could limit the economic fallout and allow a ‘return to normalcy’. Conversely, a longer war risks sustained constraints in hydrocarbons from the Gulf that risks inflationary spikes, energy supply shortages, and a higher interest rate path. 

Identifying the length of the conflict is, of course, impossible. There are, in the words of the late US Secretary of Defense Donald Rumsfeld, too many ‘known unknowns’ and ‘unknown unknowns’. As such, a sensible way of looking at the situation may be examining the factors that could push the conflict towards a short war (weeks, a month), and those that direct it towards a longer conflagration (many months). These factors are by no means an exhaustive assessment of the factors that will influence the conflict, which are both increasingly global in nature, but also down to the capricious views of individual leaders on both sides.