China Jitters Aid Core FI, Debt Auctions Take Focus

China's crackdown on the private sector inspired a dominant defensive feel in the Asia-Pac session, generating demand for core FI. Bond auctions were scrutinised in both Japan and Australia, with U.S. Tsy set to hold two offerings later today.

• T-Notes stabilised after the initial rally and last trade +0-05 at 131-00. The contract topped out at 131-01, just slightly below 131-01+ which capped gains on Monday. U.S. Tsy yield curve twist flattened as cash markets reopened after a closure in observance of a domestic holiday. Yields trade -0.6bp to +3.0bp at typing, off initial highs across the curve. Eurodollar futures trade -0.5 to +1.5 ticks through the reds. Focus in NY hours will move to 3-Year & 10-Year debt auctions as well as Fedspeak from Clarida, Bostic & Barkin.
• JGB futures advanced in morning trade before trimming gains and moving away from the session high of 151.27. The contract trade at 151.23, 3 ticks above previous settlement. Cash JGB yields trade marginally mixed. Japan's MOF auctioned 30-Year JGBs, with bid/cover ratio slipping to 2.90x from 3.00x seen at the previous auction and with low price matching BBG dealer poll forecast.
• Aussie bonds rode the wave of broader impetus. Futures promptly reversed losses and crept higher but lost steam later in the session. YM last sits -4.5, XM trades -0.5, the latter operates in close proximity to its session highs. Cash ACGB curve flattened a tad, yields last trade -2.5bp to +4.3bp. Bills run 1-4 ticks lower through the reds. Local headline flow and debt supply provoked little market reaction. The AOFM auctioned A$150mn of the 21 Nov '27 linker, drawing bid/cover ratio of 3.83x (prev. 4.68x). Elsewhere, ANZ Roy Morgan Weekly Consumer Confidence improved a tad, while monthly NAB Business Confidence deteriorated.