Caution Evident, But Core FI Generally Insulated

Focus continues to fall on the dealings/knock on impact of the Wall Street Bets retail trader group in the U.S., with worry re: their ability to create volatility evident at the Asia-Pac re-open, as markets traded defensively. This added to a sense of caution that started with the softer than expected official Chinese PMI data releases over the weekend (with a miss for the Chinese Caixin m'fing PMI also witnessed during Monday trade). U.S. Tsys looked through the broader noise, with bulls unable/unwilling to force an extension after Friday's late uptick. A sense of calm then came to the fore, albeit with nothing in the way of notable headline flow, as e-minis more than pared their losses and the USD surrendered its early gains. T-Notes last print +0-03, at 137-04, while cash trade has seen some bear steepening, with 30s running ~2.5bp cheaper on the day. T-Note volume is healthy enough, nearing 110K, although there has been little in the way of standout flow observed during Asia-Pac hours.

• JGB futures unwound some of the weakness that was seen during the final overnight session of last week, last -6, stabilising around best levels of the session with U.S. Tsys working off of their own intraday highs. Cash JGB trade saw yields print little changed, although there was some bias for ever so modest cheapening given the moves seen in U.S. Tsys on Friday. Meanwhile, longer dated (30- & 40-Year) swap spreads continued the widening that was seen on Friday. Local news flow has been limited, with the Sankei suggesting that Japan will extend its regional COVID states of emergency to March 7.
• Early Sydney trade saw Aussie bond futures off of their Friday lows, given the aforementioned risk factors and news of a 5-day lockdown in Perth, on the back of an isolated positive COVID test in the city. Elsewhere, comments from Australian PM Morrison pointed to a government cognisant of the need for medium term fiscal prudence. YM -1.0, XM -3.0, with ranges fairly tight after the early uptick from overnight lows.