Core FI Bid In Asia

The mix of the Taliban taking the Afghan capital of Kabul, lower oil prices, general worry surrounding COVID and a softer than expected round of Chinese economic activity data for July combined to support the broader core FI bid during Asia-Pac hours.

• T-Notes trade +0-12 at 134-10+ as a result, a touch shy of best levels. The major cash Tsy benchmarks run ~1.0-3.0bp richer on the day, with 7s outperforming on the curve. Pockets of TYU1 buying helped to support the space, with that contract running on more than healthy volume of ~162K ahead of European dealing.
• JGBs also benefitted from the broader defensive feel to the session, with continued reports surrounding the potential for a fairly imminent extension of the COVID-related state of emergency in play across several Japanese prefectures (in addition to the scope for the widening of the restrictions to other prefectures) bolstering the bid further. Futures last +15, with cash JGBs running 1.0-2.0bp richer on the day.
• The ACGB space drew support from the broader risk-off theme, in addition to the local COVID situation in Australia. A fresh snap lockdown in Darwin was declared on Monday, with the lockdowns in both Melbourne & the ACT extended. NSW saw restrictions broadened & deepened over the weekend, with harsher implementation of restrictions set to come into play (NSW recorded another record daily COVID case count on Monday). YM +4.0, XM +7.0, with the 10- to 12-Year zone of the cash ACGB curve outperforming.