Core FI Generally A Touch Firmer In Asia

A non-committal start to the week for U.S. Tsys, with T-Notes last +0-02 at 132-16, sticking to a 0-02+ range thus far on volume of ~55K. Futures activity was supported by the quarterly rolling process, although volume was still sub-par overnight. Participants have looked through the latest round of headlines pointing to greater regulatory oversight for commodities markets in China, with authorities flagging excessive speculation as a key driver in the recent run up in domestic commodity prices, vowing a zero tolerance policy re: monopolies operating in the space (the benchmark Chinese metal futures trade ~4-7% lower on the day at typing as a result). Yields are little changed across the cash Tsy curve. The latest Chicago Fed national activity index reading & Fedspeak from Brainard, Bostic, Mester & George are set to headline during NY hours on Monday.

• JGB futures stuck to a narrow range, briefly extending on the gains lodged in the final overnight session of last week, with little to go off outside of the previously flagged potential for an extension of the state of emergency in play across various regions of Japan (which would likely bring the expiry of the restrictions in play across most regions in line with the expiry of the restrictions in the Hokkaido region). JGB futures last print 4 ticks above Tokyo settlement levels, with the major cash benchmarks little changed to 1.0bp richer across the JGB curve. Elsewhere, the BoJ conducted its scheduled round of 1- to 5-Year JGB purchases, leaving the purchase sizes unchanged, with no movement in the offer to cover ratios observed vs. prev. ops covering the buckets in play.
• Aussie bond futures have ticked higher in early trading this week, with YM taking out the recent highs, last +2.0, a touch shy of best levels (after bulls forced the highest levels since liquidity moved into the M1 contract, testing the March highs on a continuation chart in the process), with short positioning (flagged back on Friday) potentially aiding the move. XM also trades +2.0, as both contracts build on their respective gains lodged back on Friday. We should highlight that the ACGB Apr '24/Nov '24 yield spread has narrowed to the tightest levels seen since the backend of April (last ~18.0bp), reflecting a higher probability that the RBA's 3-Year yield targeting mechanism will be rolled over to ACGB Nov '24 in July. Still, the spread only operates around the mid-point of the range witnessed since mid-March. On the supply front, we have seen SAFA launch a tap of its May '32 line, for up to A$500mn, while NBN is taking IOIs on 7-Year issuance.