Asia Wakes Up To Further Steepening

T-Notes see a light bid at the re-open, to print +0-02+ at 135-13, with a firming in Aussie bonds perhaps leading as participants potentially look to cross market opportunities.

• RTRS have flagged comments from U.S. State Department spox Price, who noted that the recent remarks from senior Chinese diplomat Wang Yi reflect a continued pattern of Beijing seeking to avert blame for its actions… no sign of a cooling of tensions there then.
• As a reminder, the space softened on Monday, with bear steepening in play as 30s went out 4.0bp cheaper on the day, although T-Notes finished comfortably off of worst levels. Comments from ECB President Lagarde provided a brief reprieve from the reflation trade narrative during the early NY morning, as she noted that the central bank is "closely monitoring the evolution of longer-term nominal bond yields." A sizable TYH1 block buy also helped provide support during the NY morning. Still, the broader reflation narrative came back to the fore in the wake of Lagarde's comments with the space cheapening again, volume boosted by activity in the futures rolls, as desks pointed to fast money & prop a/c selling, in addition to deal and swap-tied hedging.
• There is little in the way of tier 1 risk on the regional Asia-Pac docket on Tuesday, with a market holiday in Japan keeping cash Tsys closed until London hours.