Cheapening Apparent

Spill over from Friday's NY trade and stronger than expected CPI data out of New Zealand created some notable pressure for core FI markets during Asia-Pac hours. While there were some spurts of demand, a convincing bid never really came in, with weakness extending as we moved through the overnight session. Marginally softer than expected Chinese Q3 GDP data (accompanied by mixed monthly economic activity data) failed to provide a bid for core FI, with plenty of worry re: the Chinese economy already observed in recent weeks/months. BoE Governor Bailey also fanned rate hike speculation in the UK over the weekend, which would have provided some downward impetus.

• T-Notes breached cluster support on the sell off, to last trade -0-09+ at 130-21+, while the belly represented the weakest point of the cash Tsy curve, as the broader benchmarks cheapened by 2.5-4.0bp on the day. NY hours will see the latest round of U.S. industrial production data, which will be supplemented by Fedspeak from Quarles & Kashkari.
• JGB futures have trickled lower early this week, with the offshore impulse and lack of domestic risk events evident on Monday allowing dealers to extend on the weakness seen during the second half of Friday's Tokyo trade, which spilled into the overnight session. Futures last -15, just off early lows, and still some way above the next area of technical support (the month-to-date lows located at 150.18). The 7- to 20-Year zone of the cash JGB curve represents the weak point, cheapening by ~1bp thus far. Super-long swap spreads have seen some widening, pointing to payside flows helping the broader weakness.
• The trans-Tasman impetus from the previously flagged NZ CPI print accentuated the bear flattening witnessed overnight, leaving YM -18.0, trading through a couple of notable technical support levels, while XM sits 8.5 ticks lower on the day. Positive developments surrounding the wind back of COVID restrictions in NSW, Victoria & Queensland were also noted.