Choppy Overnight

T-Notes traded firmer at the re-open, printing through Tuesday's high. There was some early focus on the FT re-hashing a week-old study questioning the efficacy of the Pfizer vaccine vs. some COVID mutations, with the ensuing move retracing as it became more widely apparent that the story represented old news. T-Notes last +0-05+ at 135-19, with further choppy trade briefly in play alongside some dollar weakness. Flow wise, 20.0K of the FVJ1 125.50/124.50 risk reversal was blocked, buying the puts to sell the calls, building on recent Asia-Pac exposure to downside FV structures

• JGB futures lacked any real direction after Tuesday's Tokyo holiday, last +3. Cash trade saw mixed performance out to 10-Years, with some underperformance for the super-long end, resulting in bear steepening, while longer dated swap spreads are now a touch wider on the day. Japanese Finance Minister Aso provided plenty of headline fodder, although none of it was new. Aso once again pointed to the COVID-driven deterioration in Japan's fiscal situation, while deploying some well-trodden rhetoric re: JGBs. A liquidity enhancement auction for off-the-run 5-15.5 Year JGBs saw the bid/cover ratio firm above 5.00x, which may have provided light support in the afternoon.
• Aussie bonds looked through local matters, with the overnight underperformance holding, while the space was subjected to aforementioned chop. YM -1.0, XM -3.0, with growing interest in Aussie/U.S. 10-Year tighteners evident.