Contained Core FI In Asia

Core fixed income markets struggled for anything in the way of meaningful direction in Asia-Pac dealing, with the latest round of Chinese manufacturing PMI data providing little to no impetus, although a firmer than expected official non-manufacturing PMI print may have provided a cap for core FI markets overnight (note that the better-than-expected print was seemingly driven by price increases and business expectations). A reminder that China is set to start a week-long holiday on Friday, while Hong Kong markets will also be closed on Friday, but return on Monday.

• An uptick in e-minis has seen T-Notes move off highs to last trade +0-05 at 131-20, sticking within a narrow 0-04 range. Cash Tsys run little changed to 0.5bp cheaper across the curve. Senate Majority Leader Schumer pointed to a bipartisan deal to keep the government funded until December 3, although the hurdles to increased fiscal spending and debt ceiling worries remain evident. A raft of Fedspeak headlines during NY hours, with weekly claims data and the latest MNI Chicago PMI print also due.
• JGBs ticked higher at the re-open, playing catch up to the late NY uptick in Tsys, but faded through the afternoon, with the contract last dealing -8, potentially hampered by worry surrounding the spending plans of a Kishida government. Cash trade sees yields run little changed to ~1.0bp richer, with 5s outperforming on the curve. There is some speculation that the Q4 Rinban plan (released after hours today) may see the BoJ cut the size of its Rinban purchases covering JGBs out to 10s. The latest 2-Year JGB auction was easily digested, with the BoJ's monetary policy settings underscoring takedown despite the headwinds outlined ahead of the auction, as we suggested would be the case. There was a marginal shortening of the price tail, with the cover ratio nudging lower but holding above the 6-auction average.
• ACGBs looked to the broader impetus, but stuck to contained ranges, with YM -1.0 and XM +0.5 at typing. Australian Treasurer Frydenberg outlined a ~A$27bn narrowing of the commonwealth fiscal deficit for FY20/21 when compared to projections made in the May budget. Elsewhere, Victoria's COVID case numbers continued to surge.