Brainard-Inspired Bid In Asia

A BBG source report pointed to current Fed Governor Lael Brainard being a "serious rival" to the incumbent when it comes to the race to become the next Fed Chair, after an interview with President Biden last week. A reminder that Brainard is seen as a more dovish alternative when compared to Jerome Powell, this meant that the Tsy market richened a little in the wake of the story crossing (note that the meeting was already reported by the wires last week). An earlier POLITICO sources piece pointed to Powell being the clear frontrunner in the race, while indicating that a decision will likely be made by Thanksgiving at the latest. TYZ1 +0-07 at 131-16+, 0-03 off highs, while cash Tsys run 1-3bp richer across the curve, with the belly leading. Asia-Pac flow was headlined by a 5K block buy of the FVZ1 122.50 calls, with a 2,410 lot block seller of TU futures seen as we moved towards London trade. PPI data, a raft of Fedspeak & 10-Year Tsy supply headline the local docket on Tuesday.

• The bid in U.S. Tsys and smooth passage of 30-Year JGB supply facilitated some light flattening of the JGB curve during early afternoon trade in Tokyo, while JGB futures ticked higher. In terms of auction specifics, the supply saw the low price meet broader dealer expectations (as proxied by the BBG dealer poll), while the cover ratio recovered from the multi-month low witnessed at last month's auction as the tail saw some marginal narrowing (demand from the domestic life insurance community likely helped takedown). More details surrounding the Y100K payments to children were fleshed out via local media outlets later in the day, which saw JGB futures back from Tokyo highs and applied some pressure to the longer end of the curve, leaving the former +1.
• Aussie bond futures recovered from their early Sydney lows, leaving YM -1.5 and XM -3.0 at the bell. For XM, TCV priced a $1.0bn tap of its Nov '34 line, with the passage of the pricing removing one source of pressure. Nov-27 index linked supply from the AOFM passed smoothly, with the cover ratio moving higher vs. prev. auction and pricing printed comfortably through prevailing mids, given the well-documented inflation dynamic in play at present.