Belly Outperforms In Asia As Long End Cheapens

Core fixed income markets have settled into narrower ranges in recent dealing after a volatile start to Asia-Pac trade, with limited headline flow evident overnight. It would seem that the rally in equity markets took at least some of the edge off of the early bid in core bonds, with U.S. Tsys fading from the highs which came about on the early Asia reaction to Friday's NY bid (potentially aided by softer than expected official PMI data out of China hitting over the weekend). The belly unwound some more of last Thursday's underperformance in cash trade, while weakness crept into the longer end of the curve as we moved through the Asia-Pac session (30s sit ~3bp cheaper on the day into London hours). T-Notes +0-19 at 133-10 typing. Positives surrounding the U.S. regulatory approval of Johnson & Johnson's COVID-19 vaccine over the weekend (with its rollout set to get underway imminently, albeit with some short-term supply issues evident) have had little impact on the space. Donald Trump's heavily awaited address didn't really have any broader market impact. Overnight flow was headlined by a 1,020 lot buyer of WNM1.

• A reminder that the curve bull flattened on Friday, as 20s proved to be the firmest point on the curve, richening by nearly 15bp on the day. Global core fixed income markets recovered some poise during Friday's NY session as month-end support for the U.S. Tsy space (in the form of slightly larger than average index extensions and rebalancing out of equities into bonds) came to the fore. Long end swap spreads widened as cash Tsys outperformed and dealers seemingly set up for corporate supply.
• The latest ISM m'fing survey and Fedspeak from Williams, Brainard, Bostic, Mester & Kashkari will be eyed on Monday.