Aggressive Tsy Flattening Continues

A lack of notable news flow since Friday's U.S. close didn't sedate activity during Asia-Pac trade, with e-minis trading through their respective Friday lows and the Japanese equity markets trading particularly heavy as the Asia-Pac region reacted to Wall St.'s negative lead. This accentuated the recent round of U.S. Tsy curve flattening, with 2s and 3s seeing some modest cheapening, while the remainder of the major benchmarks richened, led by the long end as 20- & 30-Year Tsy yields fell by a little over 8bp. 10- & 30-Year yields printed at levels not witnessed since February, with the latter breaching the 2.00% level. T-Notes last trade +0-16 at 132-26, with volume nearing a more than healthy 300K. Eurodollar futures trade -0.5 to +2.5 through the reds, twist flattening, with a ~55K buyer of EDU1 with and a ~28K seller of EDH2 dominating on the flow side.

• JGB futures sit 23 ticks higher than Friday's settlement at typing, with local equity markets struggling in the wake of Friday's Wall St. sell off (Nikkei 225 last -3.7%, below 28,000) & further downbeat assessments surrounding a lack of spectators at the Tokyo Olympics. The belly of the cash JGB curve led the rally as 7s richened by ~2.0bp, pointing to a bid that was perhaps driven by futures, with the wings of the curve hovering closer to neutral levels. Super-long swap spreads briefly tightened through recent tights. Speculation continues to do the rounds re: the potential for the BoJ to step into the equity market and purchase TOPIX-linked ETFs given the morning sell off (TOPIX last -2.6%, a little off the morning lows).
• Aussie bonds followed the twist flattening theme in the U.S., with YM -2.0 and XM +9.5 at typing. Local focus fell on the (relatively limited) COVID cluster in Sydney, Barnaby Joyce regaining the leadership of the junior party within the government's ruling coalition and a slightly softer than expected round of preliminary retail sales data.